Feb. 13, 2004 — For Duncan Richardson, manager of Eaton Vance Tax-Managed Growth 1.1/A (ETTGX) since 1990, the two keys to tax-efficient investing are long holding periods and tax loss discipline.
“Minimizing turnover is the key to avoiding unnecessary taxes,” says Richardson, who recommends “a five-year to forever” investment horizon as the starting point for tax efficiency.
“Equally important for tax efficiency is using tax losses when you have them,” Richardson explains. “We try to minimize investment mistakes and maximize tax benefits by carrying over any losses.” The fund’s sell discipline is triggered when a holding goes down by 10% or its fundamentals change dramatically.
The Eaton Vance fund’s team of analysts — with average of over 17 years of investment experience — follows a bottom-up fundamental approach to find quality companies with multiple-year growth prospects. To lessen risk, the fund holds a large number of stocks, currently over 600 holdings. To further reduce risk, the fund’s sector weightings are relatively neutral compared with the S&P 500-stock index, the fund’s benchmark.
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The fund’s top ten holdings are “typically leaders within their industries with good profit characteristics and good growth prospects,” Richardson says. The fund’s top ten holdings, as of Dec. 31, 2003, were Amer Intl Group (AIG), 2.05%; PepsiCo Inc. (PEP), 1.73%; Intel Corp. (INTC), 1.66%; Morgan Stanley (MWD), 1.57%; Pfizer, Inc. (PFE), 1.57%; United Parcel`B` (UPS), 1.50%; Microsoft Corp. (MSFT), 1.48%; Genl Electric (GE), 1.46%; BP Plc (BP), 1.42%; and Amgen Inc. (AMGN), 1.36%.