32 KIPLINGER’S PERSONAL FINANCE^ 09/2017
THAYER ALLYSON GOWDYMONEY
(FMILX). Emphasizing shares of large,
growing companies, it has returned
an annualized 10.8% over the past
20 years, beating Standard & Poor’s
500-stock index. VANGUARD HEALTH CARE
(VGHCX), which focuses on medical
stocks, has fared even better, gaining
13.1% annualized. (For the list of all
our favorite mutual funds, see page 61.)
Individual stocks pose more risks,
of course, but they can be well worth
it. Buffett’s holding company, BERKSHIRE
HATHAWAY (BRK.B, $169), has been a steady
winner, edging the S&P 500 over the
past 15 years with an annualized re-
turn of 9.2%. Berkshire holds a mix of
stocks and businesses that it owns out-distributes minimal capital gains, it’s
tax-efficient, too (though you may owe
taxes on dividends if you hold the ETF
outside of a retirement account).
You can try to beat the market with
other ETFs, actively managed mutual
funds or individual stocks. Todd, for
instance, thinks banks will benefit
from lower corporate tax rates and
a rollback of regulations. FINANCIAL
SELECT SECTOR SPDR FUND (XLF, $25), a
member of the Kiplinger ETF 20,
holds a bundle of them. (For the full
list and other market-beating ideas,
see “5 Super ETFs,” on page 48.)
Among mutual funds, one of our
favorites is FIDELITY NEW MILLENNIUM
4
right, including a railroad, insurance
companies and an aircraft-parts firm.
Buffett, 87, will eventually depart. But
the company he built should continue
to thrive, riding the strength of the
U.S. economy. DAREN FONDADig Into Real Estate
When Jonathan Harb landed a major
contract for his computer graphics
business, Whiskytree, the extra cash
motivated him to invest in residential
property. His timing was spot-on. “We
were in the aftermath of what hap-
pened in 2008, and market conditions
were fantastic,” says Harb, 43, who
lives in San Rafael, Calif. He settled on
two three-bedroom single-family resi-
dences in Santa Rosa, a more afford-
able city in the Bay Area, and put 25%
down on each of the $300,000 homes
at the end of 2010 and beginning of- More than six years later, they
are worth about $525,000 each.
Harb, whose company creates
graphics for movies such as Rogue
One, Thor and part of the Hunger
Games series, has already passed the
million-dollar mark in home values
(on top of his rental units, his current
house in San Rafael is valued at about
$1 million). But he continues to rake in
cash by renting out both homes, typi-
cally to families who stay for two to
four years. To set attractive prices
when the leases turn over, he’ll survey
at least a dozen similar properties to
gauge the cost per square foot as well
as the monthly rent. He then prices
his units just below market rate. Cur-
rently, the rent is $1,925 per month for
the unit with two bathrooms and
$2,450 per month for the unit with
three baths. The rents more than
cover his mortgage payments.
How to get started. Though vacation-
home sales fell in 2016, sales of invest-
ment properties rose 4.5% over the
previous year, according to an annual
second-home survey by the National
Association of Realtors. If you’re new
to homeownership but want to dip■ JONATHAN HARB’S
RENTAL PROPERTIES IN
SANTA ROSA., CALIF.,
HAVE PASSED THE
$1 MILLION MARK IN
MARKET VALUE.