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Readers should go elsewhere for retirement investment

Dear Mr. Berko: We are in our late 30s and have $62,000 to invest for our retirement, but we can’t find a manager who will work with us because the amount is so small. Most professionals want $250,000 as a minimum. We did find one man who will manage our small account for a 3 percent annual fee. He would invest our money in various Putnam mutual funds making changes as the circumstances warrant.

We don’t know anything about the Putnam funds and would very much like your opinion. This manager thinks he can make us — after fees — between 7 percent and 12 percent annually, which we think is pretty good. And we’ve enclosed information about the man and his firm. We would also like your opinion here, too. – HS, Oklahoma City

Dear HS: A 7 percent to 12 percent average annual return after fees is fantastic, but I doubt that return is possible using the Putnam family of mutual funds. The Putnam Group of mutual funds, home-ported in Boston, has been around for more than 70 years. Some of those years have been good years, some of those years have been so-so years and some of those years have been terrible years. Founded by patrician George Putnam in 1937, this blue blood firm enjoyed an admirable reputation helping American invest their money.

Today, Putnam manages over $110 billion for 7 million shareholders and is owned by the Great-West Life Assurance Co. of Montreal. However, according to Bloomberg BusinessWeek’s Mutual Fund Scoreboard, you would have to be a bloody fool to own any of the 38 Putnam equity funds it covers. Putnam’s three-year, five-year and 10-year performance periods stink. Putnam’s fund performance is so incredibly negative that some professionals wonder why the firm is still in business. And if old George were still alive today, he’d be so embarrassed with this performance that he’d turn face down in his Boston coffin to avoid looking at his peers.

Now contrary to what the scofflaws at the SEC advise (Its bureaucrats are as crooked as a corkscrew.), one must always use past performance as an indicator of future results. You’d have to be a blithering idiot not to. And considering Bloomberg’s analysis of Putnam’s equity mutual funds past performance, you’d have to be dumber than a stump to invest in old George’s equity funds.

Now suffice it to say that manager and the firm employing him have not been good citizens. They’ve got rap sheets several meters long and may be paying big bucks to some Financial Industry Regulatory Authority bureaucrats to keep their license from being fried. Meanwhile their 3 percent management fee plus the average 1.5 percent Putnam management fee (4.5 percent) is turnpike thievery. I don’t know how you found those crooks, but I suggest that you “unfind” them right away.

And, sadly, the Merrills, the JPMorgans, the Dean Witters, etc., don’t give a flying freckle about small investors like you. Your kind is the “great unwashed,” unprofitable, time-consuming and a nuisance. But consider the following: Open a joint account at Charles Schwab and invest that $62,000 as follows: 15 percent in 30-year Treasury Inflation-Protection Securities, 20 percent in Verizon, AT&T and Vodaphone, 20 percent in GlaxoSmithKline, Bristol-Myers and Pfizer, 25 percent in Copano Energy, Atlas Pipeline and TC Pipelines and 20 percent in Golub Capital, Compass Diversified and PennantPark.

Reinvest all the dividends and don’t look at your portfolio more than once a year. And 30 years hence when you hang up your tools and cash in this booty take your spouse out to dinner and drink a toast to me.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com.

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