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Friday, April 28, 2006

Barbell Strategy for Mutual Funds

Chet Currier, a Bloomberg News columnist, outlines a new twist on the old "babrell" strategy, using equities instead of bonds. As he notes, "Financial barbell strategies ...involve playing a market at its outer ends, with the aim of getting a better result than you could attain in the middle." Currier proposes the idea of investing simultaneously investing in fund management stocks and an index fund or funds. The idea is, "You offset the concentrated risk of the manager stock with index funds' diversification. And you spice up the index funds' return possibilities with the manager stock." See the article at Bloomberg for more details and the results of a backtest of the strategy.
(permalink) -- Posted by KenW

Thursday, April 27, 2006

Record Mutual Fund Cash Flows

Jonathan Burton, MarketWatch, reports that investors poured record amounts of cash into mutual funds in March. Citing mutual fund reaearcher Lipper Inc., he said "Stock funds took in an estimated $34 billion in new money for the month -- the best March on record, and only the second time since 1982 that funds garnered more cash in March than in February. Fund flows in March even surpassed the $31 billion added in January, which typically is the strongest month for new fund purchases. ...March's total, about $94 billion of new cash cascaded into funds in the first quarter of the year -- a figure topped only by the first quarter of 2000, when the technology-driven bull market peaked." Lipper said, "...however, the new money seems much less speculative, [and] ...could signal that baby boomers are becoming more serious about retirement preparations." For more, see the MarketWatch article.
(permalink) -- Posted by KenW

Wednesday, April 26, 2006

AARP Launches Three Mutual Funds

AARP Financial, a new subsidiary of AARP Services, Inc., yesterday announced the introduction of the AARP Mutual Funds. According to their web site, their offerings consist of three asset allocation mutual funds with each fund designed to serve as a complete mid- to long-term investment portfolio for the 50-plus investor. The three new AARP Mutual Funds include: AARP Conservative Fund, AARP Moderate Fund, and AARP Aggressive Fund. Each of the Funds invests in a diversified mix of stocks, bonds and other securities through a "fund of funds" structure. Each fund allocates its assets across three underlying portfolios. The portfolios seek to match the performance of market indexes for U.S. stocks (MSCI U.S. Investable Market 2500 Index), international stocks (MSCI EAFE Index); and U.S. bonds (Lehman Brothers Aggregate Bond Index).
(permalink) -- Posted by KenW

Tuesday, April 25, 2006

Two New NASDAQ Exchange Traded Funds Launched

The Nasdaq Stock Market, Inc. (Nasdaq: NDAQ) and First Trust Advisors L.P. announced today the launch of two new exchange traded funds (ETFs) -- the First Trust NASDAQ-100 Equal Weighted Index(SM) Fund (Nasdaq: QQEW) and the First Trust NASDAQ-100 Technology Sector Index(SM) Fund (Nasdaq: QTEC) -- that are based on the NASDAQ-100 Equal Weighted Index(SM) (Symbol: NDXE) and the NASDAQ-100 Technology Index(SM) (Symbol: NDXT), respectively. The ETFs are managed by First Trust Advisors L.P. and listed on NASDAQ(R). See today's press release, here, for more details.
(permalink) -- Posted by KenW

Monday, April 24, 2006

A Case For Global Mutual Funds

Meg Richards of the Associated Press makes a case for global investing in this article from the Lexington Herald-Leader. She says, "Most American investors build their portfolios with domestic funds, then add overseas exposure with international funds that invest in non-U.S. issues," and adds "...global investors buy the world's best companies, regardless of where they're based. Fund managers who take this approach wind up with far-reaching portfolios, which some consider to be better core holdings than traditional large-cap domestic equity funds." Kai Wiecking, an analyst with Morningstar interviewed in the article, says, "Why would you restrict yourself? In the future, what I'm hoping to see is for the global fund to be the natural choice of beginning investors looking at just one stock fund to start out with, rather than combining a domestic and international fund, which in each case the manager is artificially restricted."
(permalink) -- Posted by KenW

Friday, April 21, 2006

Focus Funds

John Waggoner, a personal finance columnist, focuses on "focus funds," mutual funds which have fewer than 30 portfolio holdings, in his weekly column at USA TODAY. Along with cautions regarding diversification, he spotlights five top-performing focus funds sorted by their top five-year records: CGM Focus Fund (CGMFX), Hennessy Cornerstone Growth (HFCGX), Heartland Value Plus (HRVIX), Fairholme (FAIRX), and Yacktman Fund (YACKX).
(permalink) -- Posted by KenW

Wednesday, April 19, 2006

Warning Against Chasing Mutual Fund Performance

Chet Currier, Bloomberg News, warns against chasing today's hot performing funds such as international, emerging-market and commodity funds, in a new article published at the International Herald Tribune. Currier cites a current discussion of the subject on the Web site of the Vanguard Group, and details his own independent study which showed "past performance in mutual funds can give a strong impression of persisting, rewarding trend followers enough to keep them on the hook." See the article for details.
(permalink) -- Posted by KenW

Tuesday, April 18, 2006

Mutual Fund Trend: Quantitative Funds

Eleanor Laise of the Wall Street Journal reports on a growing trend of quantitative mutual fund management, "Mutual fund companies increasingly are rolling out funds that dispense with hands-on managers and instead rely on computers to select stocks." In this article from the Charlotte Observer, she says "...they are multiplying now as fund companies seek to boost performance while cutting costs," and spotlights three firms introducing new quant funds: Janus Capital Group, Firsthand Capital Management, and Charles Schwab. Laise said, "Studies have found that quantitative funds have performed slightly better than traditional actively managed funds over the past few years, but over the longer term have delivered returns similar to market indexes."
(permalink) -- Posted by KenW

Monday, April 17, 2006

Mutual Funds Spring Cleaning

Chuck Jaffe, a senior columnist with MarketWatch, says "It's time for another spring cleaning ritual: organizing your mutual fund files," and, "Done properly, a little effort now will not only make it so that future returns are less taxing on your time and energy, but also will make it so that you have better control over your portfolio." Jaffee tells you what you need to keep and what you can safely throw away. And, at the end of the article, published at the NewsTribune, he provides some helpful tips on "some spring cleaning of your portfolio, not just your filing system."
(permalink) -- Posted by KenW

Friday, April 14, 2006

S&P Releases Latest Index Versus Active Mutual Fund Scorecard

Actively managed mutual funds outperformed their relative Standard & Poor's benchmark indices in five of 11 general equity categories during the 1st quarter of 2006, Standard & Poor's reported yesterday. According to the S&P's Indices Versus Active Funds Scorecard (SPIVA), one category ended the first quarter in a tie with active funds trailing indices in the remaining five. The SPIVA Scorecard shows that the S&P MidCap 400 outperformed 51.5% of mid-cap funds during the first quarter, while the S&P SmallCap 600 outperformed 64.2% of small-cap funds. Actively managed funds fared better in the large-cap category, with 52.3% of them outperforming the S&P 500. Growth and value funds had divergent fortunes during the first quarter. While a convincing majority of large-, mid-, and small-cap growth funds outperformed their comparable S&P growth indices, their value counterparts underperformed their relative S&P value indices. See the press release for more details.
(permalink) -- Posted by KenW

Thursday, April 13, 2006

First U.S. Oil Exchange-Traded Fund (ETF) Launched

Victoria Bay Asset Management and the American Stock Exchange have announced the launch of the United States Oil Fund (USO). USO's total returns are expected to track the price movements of West Texas Intermediate (WTI) light, sweet crude oil, whose price is the primary benchmark in the U.S. for crude oil. USO will invest its assets in futures contracts for WTI light, sweet crude oil and other petroleum-based fuels that are traded on regulated futures exchanges in the U.S. and elsewhere and other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and over-the-counter transactions that are based on the price of oil. For more details, see the press release.
(permalink) -- Posted by KenW

Tuesday, April 11, 2006

Average Investor Underestimates Importance of Mutual Fund Fees in Investment Decisions

A study that examines the demand for high-fee mutual funds finds that many investors do not realize that fund fees are important for making investment decisions, are swayed by irrelevant prospectus information, and often buy high-cost funds even though they sense they may be making a mistake. The study, "Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds," was conducted by James Choi of the Yale School of Management, David Laibson of Harvard University, and Brigitte Madrian of Wharton using MBA and undergraduate students from Ivy League universities as subjects. The students, who had difficulty navigating fees, were found to have a higher degree of financial literacy than the typical American investor. Find more details in the Yale School of Management press release.
(permalink) -- Posted by KenW

Monday, April 10, 2006

Gold Mutual Funds and Exchange-Traded Funds (ETFs)

With gold prices near 25-year highs, Meg Richards, of The Associated Press, looks at the case for and against owing gold or gold mutual funds or gold exchange-traded funds (ETFs), in this article from the Post-Gazette. She spotlights State Street's streetTracks Gold Shares ETF (GLD) and the iShares Comex Gold Trust (IAU) among ETFs, and U.S. Global Investors Gold Shares (USERX), U.S. Global Investors World Precious Minerals (UNWPX), Fidelity Select Gold (FSAGX), American Century Global Gold (BGEIX) and Vanguard Precious Metals and Mining (VGPMX) among no-load mutual funds.
(permalink) -- Posted by KenW

Tuesday, April 04, 2006

Best No-Load Mutual Funds Lists

Warren Boroson, a syndicated financial columnist, took a look at Kiplinger's list of 25 best mutual funds for an article in today's Daily Record. However, before he did, he compiled his own impressive list of "the very best [27 no-load] funds." Boroson found six duplications and three funds he said he would have omitted. For more on his thinking and his list, as well as Kiplinger's, see the complete article here.
(permalink) -- Posted by KenW

Monday, April 03, 2006

Small-Cap Funds Lead Strong First Quarter for Mutual Funds

Michael J. Martinez, of The Associated Press, reports on overall good returns for mutual funds in the first-quarter, with small-cap funds leading the way and China international funds and gold funds performing above average, in this article from The State. He said, that "According to mutual fund watcher Lipper, diversified U.S. stock funds, which have $3.5 trillion in total assets, averaged a 6.67 percent return for the quarter. Small caps led the way, with aggressive smaller-company funds posting average returns of 12.56 percent and conservative small-cap funds averaging a 10.56 percent return. Despite five-year highs for the Dow Jones industrials during the quarter, large-cap growth funds had the slowest growth, averaging a 3.07 percent return." Martinez also listed the best and worst performing funds, year-to-date.
(permalink) -- Posted by KenW