Lipper Research Senior Analyst Don Cassidy on "Business for Breakfast" 1060 KRCN - 2006 Year-to-date performance
Q. Don, it hardly seems possible but February has come and gone. How do
the performance numbers look in funds for 2 months?
A. You're right. And spring training has started, so winter can?t last too
long?
Q. Wasn't February a little wintery for funds investors?
A. Well, it was slightly chilly, not anywhere nearly as pleasant as January
had been. But hardly a disaster in historical context!
Q. Some numbers, please?
A. Sure. Just for context and a big picture:
- Bond funds gained an average 0.46%
- Stock funds lost an average 0.48%
- The S&P 500 index funds averaged +0.23% for the month.
- January was quite pleasant, so the average stock fund is now still up about
4.8% YTD (2 months).
Q. How is it that the S&P 500 was up, but yet the average stock fund was
down?
A. A bit untidy, but let me unravel it for you. Of course, the S&P 500 is
not the whole market, just the bigger stocks. Most of the actively managed
funds had been adding positions in the momentum groups, like energy stocks
and coppers and gold, and then those all took a pounding in February. So
the S&P-type funds, which made no such change in weightings, didn't have
those anchors pulling them lower.
Q. How much did those hot types burn people in February?
A. Natural Resources funds, which own not only oils but other things like
copper and gold and timber, lost 8.8% in the month ? they're still ahead
about 4.6% YTD.
Gold funds, after losing 8.0% in Feb, are still up 9.8%. And the
technology funds lost less, about 1.4% in February, but they are still up
5.0%
Q. So things hurt a little but people are still ahead for the year, then.
A. Oh, definitely! The only 2 kinds of equity funds (out of 67
classifications) that are actually down are Japan Funds (0.7%) and
specialty diversified funds, which are heavily the short and long/short
types of portfolios. Over 97% of funds are up for the past 2 months, net.
Between Gold and resources funds, only about 1.5% of investor money in
equity funds is there, so not exactly a huge pain spot. Just very newsy.
Q. I guess we get short memories, especially when the current perception is
a little painful?
A. Yes, I agree. And having some sense of history is a good thing for
investors, but the daily TV headlines make too many folks think very
short-term.
Q. So, what kinds of funds are actually doing the best, year to date, and
what went UP in February?
A.
- Latin American Region funds +18.0% thru Feb 28
- China Region Funds +14.3%
- Emerging Markets Funds +10.9%
- Gold funds, as said earlier, +9.8%
- Among domestic-equity types, my old favorites the Real Estate Funds
are tops with a +8.6% !
- Small-Cap Growth is not far behind with +8.2%
Q. So small-cap is winning again?
A. So far. Of course in a strongly-up market like January, that can easily
happen. But in Large and Multi-Caps, value is still beating growth by
about 1 or 1.5%.
Q. How about the world equity funds? People sure shoveled a LOT of money
into them in January?
A. They pretty much took a pause, but no disaster. Down 0.75% on average
in Feb, but still ahead 6.6% (better than domestic!) YTD. Japan was down
4.4% in Feb but China, India, and especially Russia were just roaring
ahead.
Q. What does the Lipper crystal ball see?
A. Very clouded around the details this early in the morning. Generally we
think 2006 will be a choppy year, and only small net upside progress.
Could change to downside if the Fed keeps pushing rates up too long,
though.
Q. How to invest, then?
A. Stay diversified in your fund types, so no one individual trend can hurt
you a lot. Remember and apply the lessons of too much concentration from
2000-02.
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Don Cassidy is a Senior Research Analyst at Lipper specializing in fund
flows, exchange-traded funds, (ETFs), closed-end funds, equity fund
performance, and author of Trading on Volume (McGraw-HIll).
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