1. finance
2. investing
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D4 Business |
2R
| SUNDAY, OCTOBER 26, 2014
MutualFunds
WHEN A FUND MANAGER
‘HAS LOST IT’
Fund Tracker
explain, because only a
privileged few ever saw it.
While it sounds odd, it
Chuck Jaffe
might also be chalked up to
Syndicated columnist
a guy struggling to stay
On the
relevant in the company he
recent jour­
started, as that business
ney from
transitions away from him.
Pimco to
No matter, there are
Janus, Bill
plenty of fund managers
Gross
known — at least inside
changed in
their own shops — for bi­
the eyes of
zarre, eccentric or manic
many investors from indus­ behavior.
try giant to crackpot.
All that matters to inves­
Stories emerged about
tors is if that affects the
Gross’ erratic behavior,
fund’s results.
suggesting he left in a rage
There, determining if a
of spite and discord, hitting manager has “lost it” may
the exits before Pimco could be a matter of perspective.
boot him. Critics had sever­
For a guy like Luke — a
al years of middling perfor­ long­term holder in Pimco
mance to use as proof that
Total Return — recent re­
Gross’ touch no longer was
sults haven’t diminished the
magic.
overall excellence produced
The truth lies somewhere during his time holding the
between the extreme edges fund.
of the story, and is shad­
Indeed, among famous
owed by the perceptions
managers rumored to have
and experiences of the
“lost it” as they neared the
viewer, but the whole tale
end of their career, there’s a
raises an interesting ques­
mix between guys who
tion, one voiced most clear­ simply couldn’t maintain
ly to me by Luke in Allen,
their long­term run at the
Texas, who asked “How can very top of the pack and
you tell if a manager has lost guys who fell and could not
it?”
get up.
Luke has invested with
John Neff of Vanguard
Bill Gross’ flagship Pimco
Windsor (VWNDX) had
Total Return fund for more detractors at the end of his
than 15 years, and while
stellar career, but it’s hard
slipping returns made him
to suggest investors have a
concerned, it was only after real beef.
the news broke that he
When Neff retired from
started to think he missed
Windsor in 1995, he was
something obvious and had the top performer in his
hurt his portfolio by sticking category over the last 30
around.
years of his career, and was
Whether Gross is washed top 10 percent in the last
up is an open question.
decade, despite finishing
Plenty of experts have
below­average in the last
said since Gross announced year­plus as his clock was
his plans that if they were
winding down.
looking for an uncon­
By comparison, Marty
strained bond fund, they’d
Whitman of Third Avenue
go with Janus Uncon­
Value (TAVFX) was no
strained (JUCAX) — Gross’
better than an average
new fund — just because it
performer for the last de­
will be small and nimble
cade of his career (ending in
and he will be focused on
2012), but still ranked atop
earning atonement in the
the category for the length
eyes of investors.
of his career, suggesting
As for whether investors
that the first dozen years at
should have recognized the the fund were so extraordi­
issues brewing before his
nary that they overcame
change, that would have
reversion to the mean.
been hard because every­
And then there’s Bill Mill­
thing but the fund’s perfor­
er, who made his reputation
mance happened either out running Legg Mason Value
of the public eye or without Trust (LMVTX, now Clear­
appropriate context.
Bridge Value Trust) ahead
Gross was the personifi­
of the Standard & Poor’s
cation of Pimco, the compa­ 500 for about a dozen
ny that he founded in 1971 straight calendar years.
and grew into a $2 trillion
Over the last five­ and
megalith.
10­year periods in his ca­
In his time running Pimco reer, ending in 2012, how­
Total Return (PTTRX) —
ever, Lipper had him dead
which dates to May of 1987 last and next­to­last in his
— the fund averaged 7.85
peer group.
percent annualized gains,
The last half of his 30
roughly 20 percent better
years running the fund was
than the average peer fund
so bad that he barely fin­
over the same time.
ished in the top 25 percent
He’s at or near the top of
of his peer group for the
both his Morningstar and
entire career.
Lipper peer groups for any
A legendary manager is
time period that covers the
only worth the reputation if
last decade or more.
you get the fabled results.
The last few years haven’t Buying at the peak and
been quite so kind, with
riding the downslope will
Gross ranking in the bottom convince anyone that a
quartile of his Morningstar
manager has lost it.
peer group for the last 12
In short, managers who
months.
burn through shareholder
That kind of “reversion to patience have “lost it,” no
the mean” — fundspeak for matter what they do next.
a mediocrity balancing out
“Good managers sudden­
a stretch of outperformance ly trailing their benchmark
— isn’t surprising; it hap­
and peer group — or becom­
pens to every great manager ing visibly middling for a
somewhere in a long ten­
few quarters — raises ques­
ure.
tions,” said Jim Lowell,
What had people ques­
chief investment officer at
tioning Gross’ ability was
Adviser Investments, which
the back story. There was
takes a “buy the manager,
his weird, disjointed speech not the fund” approach to
at the Morningstar Investor picking funds.
Conference in June, which
“Anything like erratic
seemingly shocked much of personal or professional
the audience.
behavior would also raise
That was only disquieting questions, as would compa­
to anyone who had never
ny management or manag­
seen Gross on stage before, er team shake­ups. ... Weak­
as the man has never been a ness relative to past perfor­
good public speaker.
mance concerns us,” Lowell
He invariably draws a
said.
crowd and makes some
“Gross — like (Mario)
headlines, but weird and
Gabelli and (Warren) Buf­
disjointed could apply to
fett — has a reputation that
virtually every speech the
outshines the track records,
guy has given in the last two but Gross has a chance at
decades (and I have sat
resurrection,” Lowell add­
through at least eight of
ed. “He’ll want to prove all
them); his Morningstar talk his critics wrong, and he
may have set new standards may do just that.”
for erratic Gross behavior,
Chuck Jaffe is senior columnist for
but it didn’t surprise anyone MarketWatch. He can be reached
at [email protected] or at
who had seen him before.
P.O. Box 70,
Infighting and curious
Cohasset, MA 02025­0070.
office behavior is tougher to
Copyright 2014, MarketWatch
Winners and losers: A mutual­fund scorecard
Your Funds
Weekly spotlight on mutual fund performance
Fund Wkly % YTD %
obj return return
Biggest funds
American Funds A AmcpA p
American Funds A AMutlA p
American Funds A BalA p
American Funds A BondA p
American Funds A CapIBA p
American Funds A CapWGA p
American Funds A FdInvA p
American Funds A GwthA p
American Funds A HI TrA p
American Funds A IncoA p
American Funds A ICAA p
American Funds A N PerA p
American Funds A SmCpA p
American Funds A WshA p
BlackRock Instl StrIncoOpp
BlackRock Instl EquityDv
BlackRock Instl GlbAlloc r
Dimensional Fds EmMCrEq
Dimensional Fds EmMktV
Dimensional Fds USLgVa
Dodge&Cox Balanced
Dodge&Cox Income
Dodge&Cox IntlStk
Dodge&Cox Stock
DoubleLine Funds TRBd I
FPA Funds FPACres
Fidelity Freedom FF2020K
Fidelity Freedom FF2030K
Fidelity Invest Balanc
Fidelity Invest Contra
Fidelity Invest GroCo
Fidelity Invest LowP r
Fidelity Invest Puritn
Fidelity Invest TotalBd
Fidelity Spart Adv 500IdxAdv
Fidelity Spart Adv TotMktAd r
Frank/Temp Frnk A IncomA p
Frank/Tmp Frnk Adv GlbBdAdv
Harbor Funds CapApInst
Harbor Funds Intl r
Loomis Sayles LSBondI x
Metro West Fds TotRtBdI
Oakmark Funds I EqtyInc r
Oakmark Funds I Intl
Oakmark Funds I Oakmark
Oppenheimer Y DevMktY
PIMCO Instl PIMS AlAsetAut r
PIMCO Instl PIMS AllAsset
PIMCO Instl PIMS TotRt
PIMCO Funds Instl Income
Price Funds BlChip
Price Funds CapApp
Price Funds EqInc
Price Funds EqIndex
Price Funds Growth
Price Funds MidCap
Price Funds N Horiz
Price Funds N Inc
Price Funds Ret2020
Price Funds Ret2030
Price Funds Value
Schwab Funds S&P Sel
Vanguard Admiral 500Adml
Vanguard Admiral GNMA Ad
Vanguard Admiral HlthCr
Vanguard Admiral ITAdml
Vanguard Admiral ITGrAdm
Vanguard Admiral LtdTrAd
Vanguard Admiral MCpAdml
Vanguard Admiral PrmCap r
Vanguard Admiral STIGrAd
Vanguard Admiral SmCAdm
Vanguard Admiral TtlBAdml
Vanguard Admiral WellslAdm
Vanguard Admiral WelltnAdm
Vanguard Admiral WdsrIIAd
Vanguard Fds TotIntBInv
Vanguard Fds DivdGro
Vanguard Fds STAR
Vanguard Fds TgtRe2015
Vanguard Fds TgRe2020
Vanguard Fds TgtRe2025
Vanguard Fds TgRe2030
Vanguard Fds TgtRe2035
Vanguard Fds TgtRe2040
Vanguard Fds TgtRe2045
Vanguard Idx Fds TotlIntl
XC
LV
BL
IB
BL
GL
LC
LG
HC
BL
LC
GL
GL
LC
GT
EI
MP
EM
EM
LV
BL
IB
IL
LV
MT
MP
MP
MP
BL
LG
XG
MC
BL
IB
SP
XC
BL
WB
LG
IL
GT
IB
BL
IL
LC
EM
MP
MP
IB
GT
LG
BL
EI
SP
LG
MG
SG
IB
MP
MP
LV
SP
SP
MT
HB
IM
IB
SM
MC
LC
SB
SC
IB
BL
BL
LV
WB
EI
BL
MP
MP
MP
MP
MP
MP
MP
IL
XC
SP
XC
Vanguard Idx Fds TotStk
Vanguard Instl Fds InstIdx
Vanguard Instl Fds InsTStPlus
5­yr %
return
+4.5 +8.1 +15.3
+4.4 +7.2 +13.7
+2.5 +5.2 +12.0
­0.2 +5.2 +4.7
+2.5 +5.2 +9.0
+3.4 +3.0 +9.1
+3.8 +4.4 +13.2
+4.4 +5.5 +13.5
+1.0 +2.7 +8.8
+2.8 +6.1 +11.4
+4.3 +9.1 +13.7
+3.6
0.0 +10.4
+3.1 ­1.8 +11.3
+3.7 +6.4 +15.0
+0.2 +3.0 +6.2
+3.8 +4.2 +12.6
+2.0 +0.8 +6.7
+0.7 +2.0 +4.0
+0.8 +0.4 +1.6
+4.2 +5.3 +16.5
+2.9 +5.5 +12.7
­0.1 +5.4 +5.4
+2.6 +1.5 +8.1
+4.4 +5.4 +15.2
NA
NA
NS
+1.8 +3.3 +10.4
+2.2 +3.4 +8.4
+3.1 +3.1 +9.4
+2.9 +6.8 +11.5
+4.2 +5.3 +14.8
+5.2 +8.0 +17.8
+3.2 +3.4 +15.4
+3.1 +7.2 +11.6
­0.1 +5.4 +5.6
+4.1 +8.0 +15.1
+4.1 +6.7 +15.3
+2.1 +5.4 +10.6
+0.5 +3.4 +6.6
+4.7 +6.2 +14.8
+1.8 ­6.1 +6.0
+0.6 +5.3 +9.2
­0.2 +5.3 +7.2
+2.5 +3.1 +9.6
+1.6 ­8.5 +9.3
+3.6 +6.1 +16.2
+0.6 +0.7 +7.8
NA
NA
NA
NA
NA
NA
­0.1 +4.1 +5.2
+0.2 +7.9 +12.6
+5.0 +5.0 +16.7
+2.9 +8.0 +13.0
+3.5 +3.1 +13.0
+4.1 +7.8 +14.8
+4.8 +4.8 +16.1
+4.3 +5.8 +16.6
+3.8 ­0.2 +21.0
­0.2 +5.4 +4.6
+2.4 +3.9 +10.4
+2.9 +3.7 +11.6
+4.7 +7.0 +15.4
+4.1 +7.9 +15.0
+4.1 +8.0 +15.1
0.0 +6.1 +4.3
+5.6 +21.7 +20.5
­0.6 +6.8 +4.8
­0.1 +5.8 +6.6
­0.2 +2.0 +2.3
+4.6 +7.3 +16.7
+5.1 +12.1 +16.5
­0.1 +2.1 +3.2
+3.8 +1.3 +16.4
­0.2 +5.3 +4.3
+1.1 +6.0 +9.6
+2.3 +6.4 +11.2
+3.9 +6.2 +13.9
­0.1 +6.5
NS
+3.4 +6.1 +14.5
+2.3 +4.7 +10.0
+1.7 +4.5 +9.0
+2.1 +4.6 +9.6
+2.4 +4.5 +10.2
+2.6 +4.3 +10.7
+2.9 +4.2 +11.3
+3.2 +4.0 +11.5
+3.2 +4.1 +11.5
+2.2 ­2.7 +4.7
Best performers
ProFunds Inv Cl UltShNq100
Rydex Dynamic InvNasdSt H
Direxion Fds LatAmBull
ProFunds Inv Cl UltBear
Rydex Dynamic InvSP5St H
ProFunds Inv Cl UltLatinAm
BlackRock A LatAA r
Deutsche Trust LatAmrEq
Price Funds LatAm
Fidelity Invest LatAm
Comstock Partners CapVlA
ProFunds Inv Cl Bear
Rydex Investor InvS&P5St
Leuthold Funds GrizzlyShrt
Federated A PrudBear p
US Global Investors WldPrcMn
GAMCO Funds MathrAAA
Invesco Funds A GoldPrec p
ProFunds Inv Cl UltEmMkt
Invest Managers EuroPGld A
Tocqueville Fds Gold t
Voya Funds Cl A RussiaA p
Aegis Funds HighYield
Amer Century Inv GlGold
Hussman Funds StrGrowth
Fidelity Selects Gold r
Oppenheimer A Gold p
Vanguard Instl Fds ExDurTreas
Wasatch USTryFd
Midas Funds Midas Fd t
+6.7 +15.2
+8.0 +15.1
+6.9 +15.4
Fund Wkly % YTD %
obj return return
5­yr %
return
SQ +16.1 +42.4 +43.8
SQ +12.1 +24.6 +35.4
SQ +12.1 +24.3 +35.2
HB +8.8 +25.1 +31.3
HB +8.7 +25.5 +29.2
SQ +8.4 +4.1 +26.7
HB +8.4 +25.0 +31.8
SQ +8.4 +12.9 +25.1
SQ +8.4 +13.2 +25.5
HB +7.9 +22.8 +29.0
HB +7.9 +26.6 +28.6
SQ +7.7 ­16.2 +7.8
HB +7.2 +16.0 +17.1
SE +7.1 ­7.9 +3.9
SQ +6.8 ­9.2 +23.0
HB +6.8 +24.7 +26.0
HB +6.8 +24.3 +25.4
HB +6.7 +21.3 +20.4
HB +6.7 +21.2 +19.4
SE +6.6 +19.6 +24.2
SQ +6.6 ­4.6 +26.8
TK +6.5 +20.3 +15.5
HB +6.5 +17.1 +20.7
TK +6.5 +20.5 +16.0
HB +6.4 +20.3 +20.1
HB +6.4 +19.5 +20.9
SQ +6.3 +3.2 +20.9
HB +6.3 +21.9 +19.8
HB +6.3 +22.7 +27.9
XG +6.2 +7.1 +17.1
ProFunds Inv Cl BiotechUlt
Rydex Dynamic NasdStrH
ProFunds Inv Cl UltNasd100
Fidelity Advisor A Biotech A
Frank/Temp Frnk A BioDisA p
ProFunds Inv Cl UltMidCap
Fidelity Selects Biotch
ProFunds Inv Cl UltBull
Rydex Dynamic S&P5 2xH p
Prudential Fds A HlthSciA
Rydex Investor Biotech
ProFunds Inv Cl UltraJapan
Fidelity Selects MdEqSys
Direxion Fds NatRBull2X
ProFunds Inv Cl UltSmCap
Fidelity Selects Health
Fidelity Adv Foc A HlthCrA r
BlackRock A HltScOp
Allianz Funds D GlblWell
Fidelity Selects Trans
ProFunds Inv Cl InternetUlt
Fidelity Advisor I Electronic
Schwab Funds HlthCare
Fidelity Selects Electr
ICON Fds Hlthcare S
Deutsche Trust HlthCare r
Rydex H Class MCapStrH
Eaton Vance A HlthSA p
Price Funds HlthSci
Fidelity Invest CapAp
Worst performers
+4.1
+4.1
+4.1
Fund Wkly % YTD %
obj return return
SQ
SQ
SQ
SQ
SQ
SQ
LT
LT
LT
LT
SQ
SQ
SQ
SQ
SQ
AU
SQ
AU
SQ
AU
AU
EM
HC
AU
SQ
AU
AU
LU
LU
AU
­11.3
­11.3
­8.9
­8.1
­8.1
­6.2
­5.2
­5.0
­5.0
­4.4
­4.4
­4.1
­4.0
­4.0
­3.6
­2.5
­2.4
­2.1
­2.1
­2.0
­1.9
­1.9
­1.8
­1.8
­1.8
­1.8
­1.8
­1.7
­1.7
­1.7
5­yr %
return
­27.2 ­37.3
­26.8 ­37.1
­14.3 ­14.1
­17.9 ­31.9
­17.8 ­31.4
­17.4 ­14.2
­2.7
­2.9
­4.3
­2.2
­4.1
­3.8
­6.3
­3.7
­11.2 ­18.4
­9.3 ­16.7
­9.1 ­16.3
­7.2 ­17.3
­9.8 ­16.0
­4.2 ­15.0
­3.3
­6.7
+2.2
­9.4
+6.1
­6.4
­2.8
NS
+7.4
­6.7
­24.1
­3.8
­5.5 +5.3
­1.0 ­12.1
­5.4
­5.5
+2.2 ­13.2
­7.1 ­11.6
+32.7 +11.5
+23.4 +9.3
­15.2 ­19.5
Footnotes: e: Ex capital­gains distribution. f: Previous day{rsquo}s
quote. n or nl: No upfront sales charge. p: Fund assets are used to
pay for distribution costs. r: redemption fee or contingent deferred
sales load may apply. s: Stock dividend or split. t: Both p and r. x: Ex
cash dividend. NE: Data in question. NS: Fund did not exist at the
start date. NA: No information available.
Key to abbreviations and footnotes:
Fund objectives: AB: Long­term top­grade corporate and govern­
ment bonds. AU: Gold oriented. BL: Balanced. EI: Equity income.
EM: Emerging markets. EU: European region. GL: Global (includes
U.S.). GM: General municipal bond. GT: General taxable bond. HB:
Health and biotech. HC: High­yield taxable bond. HM: High­yield
municipal bond. IB: Intermediate­term investment­grade corporate
bond. IG: Intermediate­term Treasury/government debt. IL:
International (outside U.S.). IM: Intermediate­term municipal bond.
LC: Large­cap core. LG: Large­cap growth. LT: Latin American. LU:
Long­term Treasury/government debt. LV: Large­cap value. MC:
Mid­cap core. MG: Mid­cap growth. MP: Mixed portfolio (stocks and
bonds). MT: Mortgage. MV: Mid­cap value. NM: Insured municipal
bond. NR: Natural resources. PR: Pacific region. SB: Short­term
investment­grade corporate bond. SC: Small­cap core. SE: Sector
(specific industries). SG: Small­cap growth. SM: Short­term munici­
pal debt. SP: S&P 500. SQ: Specialty diversified equity. SS: Single­
state municipal debt. SU: Short­term Treasury/government debt.
SV: Small­cap value. TK: Science and technology. UN: Unclassified.
UT: Utility. WB: World bond. XC: Multi­cap core. XG: Multi­cap
growth. XV: Multi­cap value
5­year % return: Annualized performance over the past five years.
Top 5 mutual funds by objective, year­to­date % return
YTD %
return
Mid­cap core
YTD %
return
InstAX­fd r +15.9
AME Fd
+15.3
EmMktI
+7.7
EmgMkts I +6.8
EmMktSC p +6.3
Stewart Capital
Longleaf Partners
Dreyfus
Columbia Class Z
JPMorgan Sel Cls
Mid Cap +10.7
SmCap
+8.5
ActMidA
+8.2
MdCpVlZ p +8.0
IntpdMCp +7.5
Emerging markets
Price Funds
Price Funds
Virtus Funds I
Westwood Funds
Templeton Adv
Equity income
Paydenfunds
Invesco Funds A
Federated Instl
Touchstone Family
Neubrgr&Berm Fds
ValLdrs
Utilities p
StrValDvIS
PrYldEq Y
EqIncInst
Health | biotech
Rydex Investor
Frank/Temp Frnk A
Fidelity Advisor A
Fidelity Selects
Fidelity Selects
Biotech
BioDisA p
Biotech A
Biotch
Health
Global
GblInfra I
GblLstInf Y
GblInfra I
GlbInfraA p
GlblInno
Lazard Instl
Brookfield Fds
Cohen & Steers
Virtus Funds A
Guinness Atkinson
International
Wasatch
Fidelity Invest
Guggenheim Fds
Allianz Fds Instl
Virtus Funds I
IntlOppt r
Canada
WldEqIncA
IntlMgdVol
ForOppI
Large­cap core
Vanguard Admiral
Vanguard Fds
Sterling Capital
BMO Funds
Vanguard Instl Fds
YTD %
return
Small­cap core
+11.5
+10.2
+10.1
+10.0
+8.7
Invesco Funds A
Lazard Instl
Hennessy Funds
Vanguard Fds
JPMorgan Sel Cls
YTD %
return
Natural resources
+26.6
+25.5
+25.1
+25.0
+24.7
Invest Managers
Invest Managers
Oppenheimer A
Oppenheimer Y
Oppenheimer Y
YTD %
return
Pacific region
+13.0
+11.0
+10.9
+9.0
+8.1
Matthews Asian
Frank/TempFrnkA
Eaton Vance A
EuroPac Funds
Price Funds
YTD %
return
Science | technology
+5.9
+4.3
+4.2
+2.4
+1.9
YTD %
return
PrmCap r +12.1
PrmcpCor +11.7
LgCValDv I +9.9
LowVolEq I +9.9
StlCPlus
+9.8
Fidelity Selects
Fidelity Advisor I
Price Funds
Columbia Class A
Columbia Class A
YTD %
return
SmallC p
USSmMid I
CorGrow O
StrSCEqInv
MExpEnhI
MLP&Engy
MLP&EnI I
StlpthAlpha
Alpha Y
Sel40 Y
IndiaInv r
IndiaGrA p
GrIndia t
AsiaSmCoA
N Asia
Electr
Electronic
GlbTech
SelComm A
GlobTech
Gold oriented
GAMCO Funds
Tocqueville Fds
First Eagle
OCM Funds
Wells Fargo Adv A
GoldAAA
Gold t
SGenGld p
GoldInv t
PrecMtlA
+6.4
+4.8
+4.5
+3.2
+2.9
YTD %
return
Sector
Trans
Fidelity Selects
ReavSelct
Fidelity Selects
Fidelity Selects
Fidelity Selects
Air
ConStap
CstHo
YTD %
return
Balanced
Wells Fargo Adv A
Wells Fargo Adv A
Price Funds
Pioneer Funds A
USAA Group
IdxAstAll A +11.5
DivCapBldr +9.3
CapApp
+8.0
ClassBalA
+7.6
GrTxStr
+7.5
YTD %
return
Intermediate bond
+17.8
+17.3
+16.8
+13.3
+12.3
Invest Managers
Dimensional Fds
BMO Funds
MorganStanleyInst
Guggenheim Fds
YTD %
return
Long­term bond
+54.5
+37.3
+35.6
+9.4
+8.1
Vanguard Idx Fds
Vanguard Admiral
GuideStone Funds
Del Inv Instl
PIMCO Instl PIMS
YTD %
return
Long­term U.S.
+20.5
+20.3
+19.2
+13.6
+12.2
Vanguard InstlFds
Wasatch
Vanguard Admiral
Fidelity Spartan
Dreyfus
YTD %
return
Mortgage
+8.0
+7.4
+4.1
+3.2
+2.8
Managed Acct Srs
Vanguard Admiral
SEI Portfolios
Deutsche Trust
Legg Mason A
+19.6
+11.1
+11.0
+8.9
+8.3
CutwSelInc
ITExQual
CorpInco I
CorPlsFxI
USIntrBdA
LTBnd
LTGrAdml
ExtDrGS4
ExtDurI
InvGrCp
ExDurTreas
USTryFd
LTsyAdml
SpLTTrAd r
UST Lng
YTD %
return
+8.1
+7.9
+7.5
+7.3
+7.1
YTD %
return
+16.2
+14.8
+14.6
+14.4
+8.4
YTD %
return
+32.7
+23.4
+19.0
+19.0
+17.8
YTD %
return
US MrtgInst
GNMA Ad
GNMA A
GNMA S
WAMtgBkA
+6.9
+6.1
+6.0
+5.9
+5.8
LOWEST
COSTS, MOST
ASSETS
MAKE THE
BEST FUNDS
Investing
Scott Burns
Syndicated columnist
Q: I
enjoy your
columns on
low­cost
investing.
Do you
have any
sugges­
tions about
major domestic stock­in­
dex funds and major do­
mestic bond­index funds?
Maybe names of several
that you might know to be
well­managed.
— B.M., Seattle
A: Nothing succeeds like
success. According to the
Morningstar database,
there are now 291 ways
you can buy an index fund
that specializes in large­
cap domestic stocks.
Often the same fund is
distributed through chan­
nels with different costs.
The way to get the best
fund is to look for the ones
with the most assets and
the lowest costs.
Over the last 10 years,
for instance, every one of
the largest 15 of these
funds beat the average of
the 291 funds in the cate­
gory. So big is good, just as
cheap is good.
What you don’t need are
index funds in the same
category that don’t have
much in assets and that
have high expense ratios.
Believe it or not, 30 of
the 291 funds have ex­
pense ratios of at least 1.30
percent! That’s higher than
the average managed
fund. Most have less than
$50 million in assets under
management.
The big, tried­and­true
funds are: SPDR S&P 500
ETF (ticker: SPY), Van­
guard 500 Index Admiral
shares (ticker: VFIAX),
iShares Core S&P 500 ETF
(ticker: IVV) and Fidelity
Spartan 500 Index (ticker:
FUSEX).
In the same group, the
Vanguard Total Stock
Market Index Admiral
shares (ticker: VTI) covers
the entire domestic stock
market — large, mid­cap
and small­cap — at a cost
of only 0.05 percent a year.
The same principles
apply in fixed­income
funds, but there are far
fewer of them.
If we limit selection to
intermediate­term govern­
ment bond funds, the
largest, most liquid and
most inexpensive are:
iShares 3­7 Year Treasury
Bond fund (ticker: IEI),
Fidelity Spartan Interme­
diate Treasury Index fund
(FIBIX), Schwab Interme­
diate Term U.S. Treasury
ETF (ticker: SCHR) and
Vanguard Intermediate
Term Government Bond
Index (ticker: VGIT). Costs
are a bit higher here, run­
ning from about 0.10 per­
cent to 0.20 percent a year.
In both these large­cap
and fixed­income catego­
ries, the larger the fund,
the greater the probability
that it will track its index
accurately.
Q: I am married, and
both my husband and I are
retired. I feel I should be
learning the basics of in­
vesting. I have gone to
presentations on the sub­
ject. And I’ve read your
column. But sometimes I
don’t even understand
some of the terminology
being used.
Can you suggest a book
or books or the best way I
might gain a basic under­
standing of investing?
T.A., Austin, Texas
A: For an easy and right­
to­the­point start, pick up
any of the books in Dan
Solin’s “Smartest Book”
series. After getting com­
fortable with Solin, get
your knowledge reinforced
by William Bernstein’s
“The Investor’s Manifesto:
Preparing for Prosperity,
Armageddon, and Every­
thing in Between.”
Questions:
[email protected]
Copyright 2014,
Universal Press Syndicate