"A" QUARTERLY REVIEW
For the most part, mutual funds got hammered during the first 13 weeks of this year and that's the good news. The bad news is, if you're a believer in stocks over the long haul, don't let a growling bear scare you away.
To be an all-weather investor, you've got to be an optimist. You know, one of those folks who believes the glass is half full rather than half empty. If that kind of thinking is a little tough for you to swallow, odds are your best investments will be money market mutual funds in which interest gets paid on money invested. During stock market down swings, these investment vehicles keep on paying interest day after day after day. Which, by the way, is why I'm a big believer in them and hope that both investors and savers have at least one money market mutual fund working for them. But money market funds are a fixed-income story, and since we're talking equities in this column, let's get back to them.
Small-cap value funds were the only category of long-term equity funds posting a positive result during the first quarter of 2001; they were up on average 1.05 percent, according to Lipper, Inc.. The average large cap growth fund, however, was down over 20 percent; mid-cap growth funds, off 22.73 percent: and multi-cap growth funds, down 23.38 percent. Hit not quite as hard were S & P 500 funds, off nearly 12 percent; balanced funds, down over 5 percent; and equity income funds, off about 6 percent.
In the sector fund arena the carnage was more dramatic. Big loser there were science and technology funds, down 34.21 percent; telecommunications funds, off 26.46 percent; and health/biotech funds down 21.7 percent. Brighter spots included natural resources funds, off over 4 percent; utility funds, down well over 6 percent; and financial services funds, off 7.5 percent.
World funds also offered no hiding place as emerging markets funds were off over 6 percent; global along with international funds down over 14 percent and European region funds lost more than 16 percent over the same time period.
Bleak as those numbers may sound, you'd be hard pressed to find a money manager who hasn't been weaned on a "buy low sell high" philosophy. And, while no one knows for sure how far this market will fall, when it begin a rebound, or how long it will take to get back to yester-year's index highs, if you're buying into today's market you're buying in at lower prices than you were a few months ago.
With that means to the long-term stock fund investor is, in a word, opportunity. This opportunity, however, is not without risk; no stock market investment---mutual fund or otherwise---ever is. But, if you're willing to take investment risks, now might be a fine time to consider buying. Provided, of course, that the fund meets your own personal investment needs and you understand that even at these lower levels stock fund per share prices could still fall lower.
Sticking only to the largest stock and balanced funds around, here's how five of the largest funds have rewarded their shareholders over the long-term:
While a fund's past performance is never a guarantee of how it will perform in the future, stock funds historically have returned 10 to 13 percent a year over the long haul. But to get those kinds of returns means staying in the game in both the good and the challenging times like these.
- Vanguard's Health Care fund was down 12.60 percent during the first quarter but over the past few years has rewarded its shareholders handsomely. Look back one year and the fund was up 22.28 percent; over the past 3 years it gained 83.88 percent; over the past five years, 202.21 percent; and during the last 10 years, was up 610.76 percent.
- Vanguard's PRIMECAP fund, down 10.92 percent for the quarter was off over 22 percent for the past year. Over the past three years, however, the fund was up over 49 percent; over the last five years, ahead more than 158 percent; and up 460 percent during the last 10 years.
- American Funds Growth fund has been another long-term winner. Down 14.11 percent this year and over 22 percent over the past year, long-term shareholders of this fund have seen their fund shares increase in value nearly 150 percent over the past five years and 369 percent over the last 10 years.
- Fidelity's Dividend Growth fund, down 8.28 percent for the quarter was up 1.15 percent for the year ending March 31. Over the last three years, the fund was up 30.88 percent and during the past five, 133.17 percent. There are no 10 years performance figures for this fund.
- The Janus Twenty fund down 24.60 percent for the quarter and 51.70 percent for the year was up over 22 percent during the past three years; 121 percent over the last five; and 345 percent over the past ten.
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