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Mutual Funds - Year to Date
Even though the market has been weak lately,
not all investors are singing the blues.
According to Morningstar, mutual funds
focusing on healthcare stocks are up 12%, on average, so far this year. By
comparison, the overall market, at least as measured by the S&P 500 is up
2%
Best Funds
In terms of funds available to individual
investors (more on that later), Fidelity Select Medical Delivery (FSHCX),
up 16% year-to-date, was the category’s best performer. The fund, which
holds mostly healthcare providers and insurers, as opposed to
pharmaceutical manufacturers and medical device makers, is no
Johnny-come-lately. It has outperformed the overall market over the past
year (16% vs. 2%), three years (12%, on average, annually, vs. 0%), five
years (7% vs. 2%), 10
years (11% vs. 2%) and 15 years (9%
vs. 6%).
Following close behind Fidelity Select
Medical Delivery in terms of year-to-date returns are T. Rowe Price Health
Sciences (PRHSX),
which does hold mostly pharmaceutical makers, and Fidelity Select
Biotechnology (FBIOX),
which true to its name, holds biotechs. Both are up 14% year-to-date.
Longer term, both have typically performed as good or better than Fidelity
Select Medical Delivery. For instance, over the past 15 years, T. Rowe
Price Health Sciences and Fidelity Select Biotechnology have chalked up
15-year average annual returns of 11% and 8%,
respectively.
Rice Hall James Small-Cap Portfolio (RHJMX),
up 11% year-do-date, was the highest returning non-healthcare fund. Rice
Hall, which holds a diversified portfolio of smaller companies, has also
chalked up impressive longer-term results. It returned 36% over the past
year. Its average annual returns over the past three, five, and 10-year
periods are 9%, 7%,
and 5%, respectively.
While the five funds I’ve mentioned have
recorded strong average annual returns, none of them are immune to strong
market downturns. Looking at 2008 when the S&P 500 lost 37%, Fidelity
Select Biotechnology, down 11%, did the best. T. Rowe Price Health
Sciences, dropped 29%, Rice Hall James lost 39%, and Fidelity Select
Medical Delivery fell 45%.
Safer Funds
If not losing in strong market downturns is
priority number one, you’ll have to be satisfied with lackluster returns
in strong years. For instance, the Midas Perpetual Portfolio Fund (MPERX),
which is designed to generate positive returns in any market, up or down,
managed a 1% return in 2008. However, in 2009,
up 17% vs. 26% for the S&P 500, it seriously, underperformed. So far this
year, it’s up only 1%. Over longer periods
though, it looks better. It has returned
8%, on average, annually, over the past five
years (vs. 2% for the S&P), and
4% over the past 10 years (vs.
2%).
Another possibility is the Merger Fund (MERFX),
which employs a merger arbitration strategy involving buying acquisition
targets and sometimes shorting the acquiring company. Merger lost only a
modest 2% in 2008. Year-to-date it’s up
2%, and its up 4%, on
average, annually, over the past three- and five-year periods,
3% over 10 years, and 6%
over 15 years. It’s only losing year out of the last 10 was 2002 when it
dropped 6% compared to a 22%
loss for the S&P 500. So, in essence, long-term, you get more or
less market returns with less volatility.
Not All Funds Included
For this report, I’ve considered only no-load
funds that are currently open to individual investors. If you’re not
familiar with the term, “loads” are fees (usually 5.5%)
charged when you buy fund shares. Those fees are used to compensate the
financial advisor that sold you’re the fund. No-load funds do not charge
such fees.
As you probably already know,
there is no guarantee that these funds will continue to perform as they
have done in the past.
published 6/19/11
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