By Max Rottersman
The top 10 funds in 2009 will become next decade’s losers, not because they’re big, but because they’re expensive.
HANOVER, NH (ETFguide.com) – Some smokers say, ‘My Dad smoked until he died at 93.’ That’s what smokers say. We don’t hear from the smokers who died. So the lucky smokers have an influence on the living while the dead can’t be heard.
There are at least 13,356,484 people in today’s largest high-fee funds. Probably more. Those who don’t know history are bound to repeat it.
Below are the largest high-fee equity funds. For these ten funds alone the managers collect over $200 million a month in fees, or $2.5 billion a year. The management companies are supposed to earn that money through superior returns. Shareholder wealth is transferred to them whether they succeed or fail.
FIGURE 1: Largest Non Low-Cost Funds
By Assets 2008 | Return | ||
Largest Non Low-Cost Funds | 10 Year | 2008 | |
AEPGX | A.F. EuroPacific Growth | 63% | -41% |
FDIVX | Fidelity Diversified International | 68% | -45% |
AGTHX | A.F. Growth Fund of America | 37% | -39% |
FCNTX | Fidelity Contrafund | 32% | -37% |
FDGRX | Fidelity Growth Company | 17% | -41% |
FMAGX | Fidelity Magellan | -30% | -49% |
AIVSX | A.F. Inestment Company of America | 17% | -35% |
CWGIX | A.F. Capital World Growth and Income | 92% | -38% |
ANCFX | A.F. Fundamental Investors | 33% | -40% |
ANWPX | A.F. New Perspective | 50% | -38% |
Average | 38% | -40% | |
These funds grew by 38% over the past decade. Contrast that with the largest ten low cost funds which only returned 7%.
FIGURE 2: Largest Low-Cost Funds
By Assets 2008 | Return | ||
Largest Low-Cost Funds | 10 Year | 2008 | |
VASGX | Vanguard LifeStrategy Growth | 8% | -34% |
VEURX | Vanguard European Stock Index | 8% | -45% |
VGTSX | Vanguard Total Intl Stock Index | 19% | -44% |
DIA | DIAMONDS | 16% | -32% |
MDY | MidCap SPDRs | 49% | -37% |
SPY | SPDRs | -14% | -37% |
VTSMX | Vanguard Total Stock Market | -6% | -37% |
FUSEX | Fidelity Spartan U.S. Equity Index | -14% | -37% |
VFINX | Vanguard 500 Index | -14% | -37% |
VPACX | Vanguard Pacific Stock Index | 21% | -34% |
Average | 7% | -37% | |
Compare the average 10-year return of Figure 1 and Figure 2. What would you want, 38% or 7%? Of course, the former, which is what Morningstar and Lipper will focus on, and the the financial media seldom question. Like the tobacco companies, nine times out of ten, the financial industry only gives voice to the living, not the dead. Thomas Wolfe wrote Only The Dead Know Brooklyn. We could say the same for mutual funds.
In Figure 3 are the largest ten equity funds in 1997. These are the funds investors piled into ten years ago. These are the funds that represent the experience of most investors today. These are the funds conveniently forgotten by the people who sell today’s fund sausage.
FIGURE 3: Largest Non Low-Cost Funds
By Assets 1997 | Return | ||
Largest Non Low Cost Funds | 10 Year | 2008 | |
FPURX | Fidelity Puritan | 22% | -29% |
AEPGX | American Funds EuroPacific Gr A | 63% | -41% |
TWCUX | American Century Ultra Inv | -27% | -42% |
FAGOX | Fidelity Advisor Growth Opportunities T | -52% | -55% |
FCNTX | Fidelity Contrafund | 32% | -37% |
FMAGX | Fidelity Magellan | -30% | -49% |
JANSX | Janus | -26% | -40% |
AIVSX | American Funds Invt Co of Amer A | 17% | -35% |
AWSHX | American Funds Washington Mutual A | 12% | -33% |
FGRIX | Fidelity Growth & Income | -41% | -51% |
Average | -3% | -41% | |
The mutual funds in Figure 3, the ones that were supposed to beat the market, lost $3 dollars for every $100 whereas the low-cost funds actually made $7.
How can you avoid repeating the simple mistake made by millions of mutual fund investors? And how can you resurrect the dead money you’ve invested in over-rated fee gobbling mutual funds? One way is to allow fundanalyze.com to help you locate corresponding fund replacements that save you money. Let your money work for you, not a middle-man against you.
These are the largest top 10 low-fee funds: (NasdaqGM: VASGX) Vanguard LifeStrategy Growth, (NasdaqGM: VEURX) Vanguard European Stock Index, (NasdaqGM: VGTSX) Vanguard Total Intl Stock Index, (NYSEArca: DIA) DIAMONDS , (Amex: MDY) MidCap SPDRs, (NasdaqGM: SPY) SPDRs, (NasdaqGM: VTSMX) Vanguard Total Stock Market, (NasdaqGM: FUSEX) Fidelity Spartan U.S. Equity Index, (NasdaqGM: VFINX) Vanguard 500 Index, (NasdaqGM: VPACX) Vanguard Pacific Stock Index
These are the top 10 fund today that may become next decade’s casualties: (NasdaqGM: AEPGX) A.F. EuroPacific Growth, (NasdaqGM: FDIVX) Fidelity Diversified International, (NasdaqGM: AGTHX) A.F. Growth Fund of America, (NasdaqGM: FCNTX) Fidelity Contrafund, (NasdaqGM: FDGRX) Fidelity Growth Company, (NasdaqGM: FMAGX) Fidelity Magellan, (NasdaqGM: AIVSX) A.F. Inestment Company of America, (NasdaqGM: CWGIX) A.F. Capital World Growth and Income, (NasdaqGM: ANCFX) A.F. Fundamental Investors, (NasdaqGM: ANWPX) A.F. New Perspective
Max Rottersman is a principal of Hanover Technology Group, LLC.
Sovereign Investor: This article is aimed at the retail investor. Do you feel it contains lessons for the sovereign/institutional investor too, given that selecting winners during a manager selection process is unlikely to get you fired. BTW are the quoted returns before or after fees, are they GIPS compliant?
No comments:
Post a Comment