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James Shircliff, manager of the Aston/River Road Small Cap Value Fund, says consumer-staples stocks are most attractive because they’ve proven to perform well in good times and bad.
The $531 million mutual fund, which garners three of five stars from Morningstar, has returned 51% over the past year, more than 91% of its small-company value peers.

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Welcome to’s Fund Manager Five Spot, where America’s top mutual fund managers give their best stock picks and views on investing in five questions.

Shircliff: I’m moderately bullish for 2010. Valuations are reasonable, and I expect the market to transition from the early low-quality, high-beta stage of the recovery to one distinguished by higher quality and lower volatility. This would suggest a focus on fundamentals in the year ahead. Another favorable trend is an increase in M&A activity, which began to emerge in the fourth quarter. [Read the full article]

Q: I often hear that you should keep three to six months’ worth of living expenses in an emergency fund, and you’ve written that some people should keep even more. But in a low-yielding environment, that’s an awful lot of money to have sitting in the bank earning next to nothing. Any advice?

A: You’re right–the past few years have brought a negative convergence for emergency-fund investors. A shaky economy and uncertain job market have underscored the importance of building a cash cushion to cover your costs in case of job loss or big, scary, unanticipated expenses such as medical bills or home repairs. At the same time, available yields on emergency-fund-appropriate investments have shriveled to next to nothing.

1. Customize, based on your own situation.Three to six months’ worth of living expenses is a reasonable starting point when setting your emergency fund amount. But think of it as just that: a starting point. [Read the full article]

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