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 dothe performance numbers look in funds for 2 months?A. You're right. And spring training has started, so winter can?t last toolong?
Q. Wasn't February a little wintery for funds investors?
A. Well, it was slightly chilly, not anywhere nearly as pleasant as Januaryhad 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 about4.8% YTD (2 months).
Q. How is it that the S&P 500 was up, but yet the average stock fund wasdown?
A. A bit untidy, but let me unravel it for you. Of course, the S&P 500 isnot the whole market, just the bigger stocks. Most of the actively managedfunds had been adding positions in the momentum groups, like energy stocksand coppers and gold, and then those all took a pounding in February. Sothe S&P-type funds, which made no such change in weightings, didn't havethose 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 likecopper and gold and timber, lost 8.8% in the month ? they're still aheadabout 4.6% YTD.
Gold funds, after losing 8.0% in Feb, are still up 9.8%. And thetechnology funds lost less, about 1.4% in February, but they are still up5.0%
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 67classifications) that are actually down are Japan Funds (0.7%) andspecialty diversified funds, which are heavily the short and long/shorttypes 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 inequity 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 isa little painful?
A. Yes, I agree. And having some sense of history is a good thing forinvestors, but the daily TV headlines make too many folks think veryshort-term.
Q. So, what kinds of funds are actually doing the best, year to date, andwhat 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 easilyhappen. But in Large and Multi-Caps, value is still beating growth byabout 1 or 1.5%.
Q. How about the world equity funds? People sure shoveled a LOT of moneyinto them in January?
A. They pretty much took a pause, but no disaster. Down 0.75% on averagein Feb, but still ahead 6.6% (better than domestic!) YTD. Japan was down4.4% in Feb but China, India, and especially Russia were just roaringahead.
Q. What does the Lipper crystal ball see?
A. Very clouded around the details this early in the morning. Generally wethink 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 hurtyou a lot. Remember and apply the lessons of too much concentration from2000-02.
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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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