Investing: 3 Ways to use $1,000 to boost your investments
BY KIPLINGER NEWS SERVIDE
Monday, December 24, 2012
12/24/12 at 3:52 AM
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You could put a little extra cash to work in a couple of mutual funds with low fees and low minimums.
For example, Homestead Small Company Stock (symbol HSCSX), a member of the Kiplinger 25, requires only $500 and charges just 1.06 percent a year in expenses. The fund’s recent three-year annualized return of 17.9 percent outpaced the Russell 2000 index by an average of four percentage points per year. Nicholas Equity Income (NSEIX), which has a $500 minimum and a 0.79-percent expense ratio, invests in dividend-paying firms of all sizes, with a goal of delivering a higher yield than Standard & Poor’s 500-stock index. The fund’s recent yield of 2.9 percent is indeed higher than the S&P’s 2.3-percent yield, and over the past five years the fund returned 6.8 percent annualized, compared with 1.3 percent for the S&P 500.
Or you could take a flier on low-priced stocks.
For example, to make tiny semiconductors you need a super-clean manufacturing environment. Entegris (ENTG) offers contamination-control, shipping and storage services. Softness in the semiconductor business made for a rough 2012, but analysts expect earnings to resume rising in 2013. At a recent $9.09, the stock sells for 15 times estimated 2013 earnings.
Erickson Air-Crane (EAC) builds helicopters used for firefighting and heavy-construction projects that are capable of lifting up to 20,000 pounds per load. At $8.01, EAC sells for just 5 times estimated 2013 earnings. D.A. Davidson & Co. analyst J.B. Groh thinks the stock will hit $10 within a year.
Verastem (VSTM), like many early-stage biotech companies, is not profitable. But UBS analyst Matthew Roden thinks the company has a formula likely to prove crucial in the fight against many types of cancer. The treatment, which targets stem cells that spread cancer, is still untested and could take more than a year to develop, but Roden thinks the stock, now $7.59, could reach $20 within two years.
Another option: Build an ETF portfolio. With exchange-traded funds, you can put together a well-rounded portfolio for less than $1,000. Start with 16 shares of Vanguard Total World Stock (VT, $49), which tracks an index of nearly all the globe’s publicly traded companies, then add two shares of Pimco Total Return (BOND, $109), an actively managed ETF that invests primarily in high-quality U.S. bonds. Not only will you hold positions in almost 4,000 stocks (including stakes in emerging-markets and small-company stocks), but you’ll also benefit from the investment ideas of Bill Gross, one of the world’s most renowned bond managers. This mix will give you a 78-percent allocation to stocks and a 22-percent allocation to bonds, appropriate for a long-term investor in his or her thirties or forties.
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