Minding Your Money

At Kiplinger's, one of our services to our readers is to do what you can't do -- namely, pick the brains of the mutual fund managers and financial advisers who handle your money to see what makes them tick.

Recently, for example, executive editor Manny Schiffres and I traveled to Fidelity Investments, in Boston, to interview Larry Rakers, manager of Fidelity Dividend Growth, and Joel Tillinghast, manager of Fidelity Low-Priced Stock, a member of the Kiplinger 25. Both men are successful managers who focus on the fundamentals of individual stocks. But in many other ways, both personal and professional, the two couldn't be more different.

Rakers is chatty, almost ebullient for the engineer he is by training. He revels in the 400 pages of stock research that Fidelity analysts send him every morning. Rather than shying away from volatility, he welcomes it to help him make buy-and-sell decisions on the 2,200 stocks he "stalks."

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For example, Rakers isn't losing any sleep over risks in the euro zone. With his bottom-up approach, what counts is whether individual foreign stocks beat their U.S. competitors. As for the impact of financial regulation, he believes that negative scenarios are already priced in to earnings models (some of his fund's biggest holdings are banks).

When we asked what he has learned in his 17 years with Fidelity, he told the story of one manager who spotted the tech bubble in 1998, then sold all of his technology holdings and missed the last two years of the bull market. The lesson: "Don't make big bets, and don't be right too early."

In contrast to the gregarious Rakers, Tillinghast is a quiet guy with an unexpectedly droll sense of humor. When he receives those hundreds of pages of Fidelity research, he's tempted to ask analysts to "use catchy headlines telling me what I'm going to get."

Like Rakers, Tillinghast concentrates on companies that are good values, and he's especially comfortable with consumer stocks, a sector he once analyzed. How does a fund manager who's responsible for more than $23 billion in assets keep his cool? "Think what could go wrong ahead of time," he says, "then do everything you can so that you're not roadkill if the worst happens."

And here's a tidbit you won't read in most financial publications: Tillinghast is a descendant of Pardon Tillinghast, who, as Joel puts it, "hung out with" Roger Williams, founder of the Rhode Island colony.

Behind the Scenes

Going one-on-one with fund managers and advisers helps us evaluate their investing strategies and track records, whether we're choosing the Kip 25 or compiling our annual fund rankings. At the recent Morningstar mutual fund conference, our team of writers corralled nearly three dozen managers and advisers. (See 15 Stock Picks From Top Mutual Fund Managers).

This year, investors who are skittish about stocks and desperate for income are pouring money into bonds, so our focus is on putting cash in your pocket -- not just with bonds, but with stocks that pay dividends (Hersh Cohen, of Legg Mason's ClearBridge Advisors unit, told us that the market's "sweet spot" is high-quality, dividend-yielding stocks). Based on our "inside information" and our own judgment, we choose investments that are well positioned to deliver the goods. That's our job, on your behalf.

P.S. Another of our jobs is to evaluate rewards offers from credit-card issuers.