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Tuesday, February 28, 2006

Mutual Funds Adding Hedge Strategies

Eleanor Laise, Wall Street Journal, reports that, "Pressured by weak stock-market returns and greater competition for investors' money, a growing number of mutual funds are making use of investment strategies typically found in riskier hedge funds," in this article from Charlotte.com. Laise, details some of the techniques used, which "include making complex derivative trades, investing with borrowed money and short selling," and lists some mutuals funds that use hedge fund strategies and some that don't.
(permalink) -- Posted by KenW

Monday, February 27, 2006

Mutual Funds Tax Tips

Forbes.com has teamed up with the authors of Ernst & Young Tax Guide 2006 to develop a series of ten mutual funds tax tips, compiled by Scott Reeves, designed to help you avoid paying more tax than necessary.
(permalink) -- Posted by KenW

Friday, February 24, 2006

Experience Matters Among Mutual Fund Managers

Chet Currier, Bloomberg News, goes into more depth on the "New S&P Scorecard on Consistency of Mutual Fund Performance," reported here last week. In this article published in the International Herald Tribune, he points out that experience matters. Currier said that "Very few funds manage to maintain a consistent top quartile ranking for long periods of time," [according to the] news release reporting the research. Yet where signs of that sort of thing did show up, said Rosanne Pane, an S&P funds strategist, "consistent top performers all had experienced management teams with tenure higher than their peers." He also reports "S&P said it had found two other characteristics of consistent performers among funds: They had lower- than-average expenses, and their managers did a better-than-average job of limiting losses in the bear market."
(permalink) -- Posted by KenW

Thursday, February 23, 2006

Index Funds Caution

Gregg Wolper spotlights a "hidden drawback" of index fund investing in this article from Morningstar via Yahoo Finance. Referring to "weighting creep," Wolper says "[index] funds tend to put more of their money into stocks (or sectors, or countries) that are rallying. ...[and] when such funds receive inflows, the manager must buy more and more of the hottest stocks (or bonds), chasing them higher and higher and higher...; the weighting of those securities becomes greater and greater, because their market values are soaring while those of other portfolio holdings are either rising less rapidly, stagnating, or falling." Citing examples in Japan and emerging markets, Wolper shows how "index funds are in effect momentum players."
(permalink) -- Posted by KenW

Wednesday, February 22, 2006

"Side Effects" of Investing in Mutual Funds

Charles Jaffe, senior columnist for MarketWatch, writes that "You don't need a prescription to buy a mutual fund but, much like a drug, fund investing can have its annoying side effects." In the original article, published at baltimoresun.com, Jaffe details seven humorous but thought-provoking "conditions" that might accompany typical mutual fund investing.
(permalink) -- Posted by KenW

Friday, February 17, 2006

New ETF Seeks Positive Earnings Surprises

John Spence, MarketWatch, reports a new exchange-traded fund (ETF), listed this week, that tracks an index from Zacks Investment Research, and " targets small companies that have delivered positive earnings surprises in recent quarters, on the expectation that will more come." The new ETF, PowerShares Small-Cap Portfolio (PZJ), trades on the American Stock Exchange. According to Spence, "The Zacks tracking index, which holds 250 U.S. small-cap stocks, is billed as taking a 'semi-active' approach because it doesn't weight companies by size like most traditional indexes." Details can be found in the MarketWatch article.
(permalink) -- Posted by KenW

Thursday, February 16, 2006

New S&P Scorecard on Consistency of Mutual Fund Performance

This week, Standard & Poor's, released its latest scorecard that measures the consistency of top mutual fund performers over three and five consecutive years. The semi-annual scorecard also measures performance persistence, corrected for survivorship bias. As of year end, the scorecard shows that only 15.5% of large-cap funds, 10.2% of mid-cap funds, and 9.8% of small-cap funds maintained a top-quartile ranking over three consecutive 12-month periods. Over the same time period, 32.2% of large-cap, 27.3% of mid-cap, and 25.7% of small-cap funds consistently maintained a top half ranking. Details can be found in the full article.
(permalink) -- Posted by KenW

Wednesday, February 15, 2006

Comparing Tax-Efficiency of ETFs with Mutual Funds

Now that many exchange-traded funds (ETFs) have a track record of several years, Dan Culloton explores whether or not they have been more tax-efficient than comparable, typical conventional mutual funds in this article from Morningstar.com. He finds the answer is generally yes, but there are some exceptions which he details in the article, which also includes a good review on why ETFs should be more tax-efficient than traditional mutual funds. Culloton concludes that, "In most cases ETFs are more tax efficient than conventional mutual funds in the same asset classes or categories. Nevertheless, ETFs can surprise you. We'd be wary of those tracking benchmarks that require a lot of turnover..."
(permalink) -- Posted by KenW

Tuesday, February 14, 2006

A Case for Choosing Low-Cost Mutual Funds

Archie Richards of the Associated Press examines four levels of costs in investing in mutual funds and uses an example to show that "With the lower-cost (and lower-trading) fund, the investor ends up with more than twice as much!" Richards concludes that "You can't control the market. Control what you can. Concentrate your money in mutual funds or exchange-traded funds whose costs are no more than 0.3 percent a year and whose rate of turnover is no greater than 15 percent a year. Low costs pay off far more than most people realize." Details and examples can be found in the AP article published at MetroWestDailyNews.com.
(permalink) -- Posted by KenW

Monday, February 13, 2006

Inflation Hedging ETF and Mutual Funds

Linda Stern of Reuters reports that "There's a new exchange-traded fund on the shelf for investors who want to hedge against inflation without spending too much time or money placing their bets. The new Deutsche Bank Commodity Index Tracking Fund is the first ETF to track a basket of commodities." Stern also lays out the case for hedging against inflation, with cautions, and looks at some "traditional mutual funds that aim at inflation via commodities," and others investing in natural resources in this article from Reuters.
(permalink) -- Posted by KenW

Friday, February 10, 2006

Lesser-Known Mutual Funds with Potential

"Anytime you can get a fund with a sound strategy, small assets and low costs, good things are likely to happen," said Russel Kinnel, director of mutual fund research at Morningstar Inc., the investment-research firm, in this article by Jonathan Burton from MarketWatch. Burton spotlights five lesser-known no-load mutual funds with these characteristics which emerged from a Morningstar screen: Sit Large Cap Growth Fund (SNIGX), ABN AMRO/Veredus Select Growth Fund (AVSGX), IMS Capital Value Fund (IMSCX), Schneider Value Fund (SCMLX), and Forward International Small Companies (PISRX). Details and a comparison chart can be found in the original article.
(permalink) -- Posted by KenW

Thursday, February 09, 2006

Mutual Fund Investors Selling U.S., Buying Foreign

Ken Hoover, Investor's Business Daily, reports that "Mutual fund investors don't seem to have much faith in the U.S. stock market these days. Despite a smart rally -- the S&P 500 is up 7.3% since its Oct. 13 low -- money has been coming out of U.S. stock funds." And, he adds, "Investors have pulled a net $500 million out of U.S. stock funds since August, according to the Investment Company Institute and TrimTabs. During the same period they've shoveled $60.9 billion into international funds, which have been performing better." Details, including an interesting chart entitled "Going the Wrong Way," can be found in the article from Investor's Business Daily via Yahoo Finance.
(permalink) -- Posted by KenW

Wednesday, February 08, 2006

Mutual Fund Investors on Global Warming

Seven out of 10 U.S. mutual fund investors now want their mutual funds to support global warming shareholder resolutions, but not one of the nation's largest mutual funds voted in favor of any climate change proxy measures during 2005, according to a major new public opinion survey from the Civil Society Institute (CSI) and a report prepared for the Ceres investor coalition.
(permalink) -- Posted by KenW

Tuesday, February 07, 2006

Mutual Funds Performance and Turnover Ratios

David Saito-Chung, Investor's Business Daily, studied top mutual funds performance and turnover ratios (in this article from Investor's Business Daily, via Yahoo Finance) and found that, "When it comes to choosing a mutual fund, remember this when you view the portfolio turnover ratio: Don't worry about it." Saito-Chung reports that a "screen by Morningstar confirms how turnover among the best funds is an irrelevant factor. Among the 1,013 funds whose 10-year track record beat their category averages, the average turnover in the past reporting year was 65%. But 24 funds had a turnover ratio of 200% or more, and 227 had turnover above 100%." The article also includes a chart comparing ten top mutual funds that "beat their peers" over the past ten years, five with high turnover ratios and five with low turnover ratios.
(permalink) -- Posted by KenW

Monday, February 06, 2006

Focus on International and Dividend Funds

Humberto Cruz, Tribune Media Services, focuses on "broadly diversified international mutual funds and on index mutual funds and exchange-traded funds that invest in U.S. stocks with a history of raising dividends," in this column from The Orange County Register. He says, "Regarding international funds, I see a welcome trend toward more diversified offerings," and "Compared to investing in bonds that pay a fixed rate of interest, investing in stocks that increase dividends regularly can allow investors to receive a growing stream of income over time, while possibly also seeing stock prices go up," and notes that "Qualifying dividends, at least through 2008 when the current law expires, are taxed at lower rates than bond interest income." In the article Cruz provides more pros and cons, and profiles several funds and fund families in these categories.
(permalink) -- Posted by KenW

Friday, February 03, 2006

Mutual Funds Start 2006 with Solid Gains

Ken Hoover, Investor's Business Daily, reports that "If the January barometer [or "January effect"] is any guide, 2006 is shaping up as a year of solid returns in mutual funds. ...The market -- including fund investors -- had a terrific January 2006. For the month, the average diversified domestic fund was up 4.66%. Small-cap funds clobbered large-cap, and growth was a bit better than value. The best-performing style was small-cap growth, up 8.62%. Large growth limped in with a 2.97% gain." Details of major index returns, selected mutual funds' returns and commentary can be found in the article from Investor's Business Daily via Yahoo Finance.
(permalink) -- Posted by KenW

Thursday, February 02, 2006

Vanguard's New Small-Cap Fund

Vanguard announced yesterday that it plans to offer a new small-capitalization fund, the Vanguard Strategic Small-Cap Equity Fund. The fund may provide a smaller alternative to the Vanguard Explorer Fund (VEXPX) which boasts assets under management in excess of $10 billion. The new fund will be the second actively managed stock fund advised in its entirety by Vanguard's Quantitative Equity Group, which currently oversees more than $400 billion in index and quantitative equity assets. The Vanguard Quantitative Equity Group will employ computer-driven models to invest in stocks in the MSCI Small-Cap 1750 Index that, "the adviser believes offer a good balance between reasonable valuations and attractive growth prospects relative to their peers," according a press release in the firm's press room.
(permalink) -- Posted by KenW

Wednesday, February 01, 2006

CGM Sports 24% Fund Family Return in 2005

Craig M. Douglas of the Boston Business Journal reports that "Capital Growth Management was head and shoulders above the competition, churning out a 24 percent return across its entire family of mutual funds in 2005," and noted that "The Boston firm's performance was not only the best among Massachusetts investment companies, but it also ranked in the top 1 percent of all mutual fund managers nationwide," in this article published by MSNBC. According to Douglas, who provides more on CGM's investment strategies in the article, "Three of the firm's [no-load] funds -- CGM Realty, CGM Mutual and CGM Focus -- are open to investors, while CGM's $461 million Capital Development Fund, which returned 25 percent last year, is closed."
(permalink) -- Posted by KenW