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Hot
Mutual Funds
With the S&P 500 Index up 20% so far this year,
the market has been good for many investors. But it wasn’t necessary to be
a great stock picker to enjoy the ride. Mutual funds investing primarily
in U.S.-based stocks (domestic) have returned 26%, year-to-date. Those
focusing on foreign stocks, up 41%, on average,
have done even better this year.
Best Year-to-Date
The best performing domestic funds so far this year include
Fidelity Select Automotive (FSALX), up 114%,
Fidelity Select Communications (FSDCX), up 80%, Fidelity Select Technology
(FSPTX), up 78%, Pin Oak Aggressive Stock (POSGX), up 74%, and Perkins
Discovery (PDFDX), up 74% year-to-date.
The best performing U.S.-based funds specializing in foreign stocks this
year include Oberweis China Opportunities (OBCHX), up 118%, Alpine
International Real Estate (EGLRX), up 118%, Dreyfus Greater China I (DPCRX),
up 103%, T. Rowe Price Latin America (PRLAX), up 102%, and Lazard
Developing Markets Equity (LOMOX), up 100% year-to date.
Finding Hot Funds
I’ll describe more outperforming funds later, but first some
background about how I found them in case you want to make your own list.
I used Morningstar’s Premium Mutual Fund Screener (Premium membership
costs $18 per month) to list funds available to most individual investors
without going through a financial advisor. Find the screener from
Morningstar’s homepage (www.morningstar.com)
by selecting
Funds and then
Premium Fund Screener (Tools). Here are the details.
Required Opening Purchase
Specify "Minimum Initial Purchase no more than $2,500."
Most mutual funds specify a minimum amount the first time that you
purchase a fund’s shares. Once you own a fund, you can usually add to your
holdings in much smaller increments.
Open to New Investors
Specify "not closed to new investment."
Some funds, especially those specializing in small stocks, set a limit on
the amount of cash that they feel they can efficiently invest. When they
reach that limit, they close the fund to new investors. There’s no point
in listing funds that you can’t buy.
Say No to Loads
Specify "no load funds only." Loads are
sales commissions used to compensate financial advisors and stockbrokers
who select mutual funds for their clients. The professionals deserve to be
paid for their work, but there’s no point in paying the fee if you are
selecting funds on your own.
Available Via Online Brokers
Specify "brokerage availability at Schwab Retail."
Morningstar’s screener sometimes lists funds that aren’t readily available
to individual investors through online brokers. The screener only allows
you to pick one broker, so I specified Schwab because it offers one of the
largest mutual fund selections.
Limit to Stock Funds
Finally, I selected “all domestic stock” or “all international
stock” to limit the results to equity rather than bond funds.
After running the screen, I switched to the Performance view, and sorted
the lists by year-to-date (YTD) returns.
Best Three-Year Returns
Since this is an unusual year in many respects, to find funds that
outperform over a longer term, I also sorted the list by three-year
returns.
By that measure, the best performing domestic stock funds included
Intrepid Small Cap (ICMAX), with a 15% average annual return over three
years, Reynolds Blue Chip Growth (RBCGX), 14%, Jennison Natural Resources
Z (PNRZX), 9%, ICON Energy (ICENX), 6%, and Yackman Focused (YAFFX), with
an 8% average annual return over three years.
The best performing international funds over the past three years included
Dreyfus Greater China (DPCRX), with a 24% average annual return, Matthews
China (MCHFX), 22%, Old Mutual China (OMNZX), 15%, T. Rowe Price Latin
America (PRLAX), 15%, and Oberweis China Opportunities (OBCHX), up 14%, on
average, annually.
As you’ve undoubtedly heard; past performance doesn’t necessarily predict
the future, so consider the funds that I’ve described as research
candidates, not a buy list.
published 10/25/09 |
