Top 4 Funds Requiring Direct Purchase: Is the Effort Worth It?

Most of the Kiplinger 25 funds come with no strings attached. But four of them come with purchase constraints if you’re new to the funds. Here’s a review of the limitations, along with the reasons we think the extra steps to buy these funds are worth it.

The hurdle:

New investors in Oakmark International (OAKIX) or Vanguard Wellington (VWELX) must purchase shares directly from the fund firm.

Why they’re worth it:

Oakmark International comanager David Herro is a veteran stock picker with a solid long-term track record. The fund’s 10-year return beats 98% of its peers. And International beat its bogey, the MSCI World ex-US index, in seven of the past 10 full calendar years.

But Oakmark’s focus on bargain-priced foreign stocks requires patience. Recent volatility in foreign markets, driven by worries about trade tariffs and a stronger dollar, has led to dismal short-term results. Over the past 12 months, the fund ranks among the bottom of its peer group.

Vanguard Wellington also sports a splendid long-term track record. The fund outpaced its balanced-fund peers—funds that hold about 60% of assets in stocks and 40% in bonds—in eight of the past 10 calendar years.

The hurdle:

According to the websites of two popular brokers, Schwab and Fidelity, T. Rowe Price QM U.S. Small-Cap Growth (PRDSX) and T. Rowe Price Small-Cap Value (PRSVX) are closed to new investors. But that’s not completely correct. Price closed the funds to new advisory accounts, but new individual investors can still buy shares. The brokerage websites aren’t able to distinguish between adviser and individual accounts, so they mark the funds as closed. You can buy shares by phone from your online broker, or buy shares directly from Price.

Why they’re worth it:

QM U.S. Small-Cap Growth beat the Russell 2000, a popular small-company index, in seven of the past 10 calendar years. And after a wobbly start as manager of Small-Cap Value in mid 2014, David Wagner has found solid footing. Over the past three years, the fund’s 12.7% annualized return beat the Russell 2000 index.