Despite sounding like a movie from the Magic Kingdom, the Healthymagination program at General Electric (NYSE: GE) has been just what the government doctor ordered.
During the first year of the six-year, $6 billion program, GE has made progress toward its goal of boosting health-care efficiency. The company has already invested $700 million in research and development and another $250 million into an equity fund to invest in startups.
The conglomerate has teamed up with Eli Lilly to help develop a test to determine the best drugs to fight cancer. With other partners, GE is studying the use of remote monitoring devices, which can make it easier for doctors to check on their patients remotely. These initiatives can decrease costs and increase health.
In addition to boosting revenue through the Healthymagination program, GE is focused on decreasing its own health-care costs. Simple things such as making sure employees don’t use the emergency room for non-emergencies – an estimated 30 percent of the trips to the ER – and providing a list of after-hour treatment centers can save $1 million or more for a company as large as GE.
GE isn’t a pure health-care play, but its Healthymagination focus shouldn’t be ignored. Business as usual isn’t going to work in the health-care field anymore. Innovative companies that can lower health-care costs deserve investors’ consideration.
Ask the Fool
Q: What are target-date funds, and should I invest in one? – J.M., Fort Myers, Fla.
A: Target-date, or “life-cycle,” funds are a relatively new development that can simplify your life. Each is designed around a particular year when shareholders would be expected to retire, tweaking its asset allocation over time as retirement draws closer.
If you plan to retire around 2030, for example, you might buy into a 2030 fund from Vanguard, T. Rowe Price, Fidelity or many other companies. The fund will likely be invested largely in stocks and some bonds, and over time it will decrease its stock holdings and add more bonds. It does the thinking and work for you.
These funds can differ widely in holdings and performance, even among those targeting the same year. Their fees can vary widely, too. So do your research before buying. Know, too, that you don’t have to buy any particular one. You might plan to retire in 2020, but the 2025 fund might have the kind of mix you want.
Remember your big picture, too. You might invest $20,000 in a good target-date fund, but if you have $100,000 in bonds and your retirement is 25 years away, your overall asset allocation might not be what you want or need it to be.
Q: Should I worry if a mutual fund closes its doors to new investors? – W.G., Lancaster, Ohio
A: It’s usually a good sign, suggesting that the fund managers aren’t finding enough top-notch places to invest their shareholders’ money, and they don’t want to resort to less-promising investments. When funds get huge, it’s harder for managers to earn high returns, as they have to spread the money out more.
My smartest investment
When my mother-in-law died in 1984, she left my wife a diversified stock portfolio. Shortly after, we realized we needed income from it, not growth, as our children were entering college. I converted everything to two utilities stocks. They consistently paid yields between 5 percent and 6 percent and have grown substantially in value. We might be worth a lot more now if we’d kept the original stocks, but we are quite happy to get dividends now that we are both retired. – J.C., West Palm Beach, Fla.
The Fool responds: You did well. People often overlook the beauty of steady dividends over many years. You can get that from lots of stocks that will also appreciate in value over time, too.
If you’re going to hold your dividend-paying stocks for many years, it can be smart to seek those that have strong histories of hiking their dividends. Just be careful – it can be risky to keep a portfolio in only two stocks, even if they’re utilities. Aim to keep your assets in at least 10 or 20 different investments.