Actually, past performance IS an indication
.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:
About a dozen years ago I invested $70,000 into three Merrill Lynch mutual funds, and when I cashed out in 2005 my investments were worth $66,000. When I was considering the purchase of those funds, my broker very convincingly told me that “past performance cannot be used to measure future growth,” and that this was “the mantra of Wall Street.” What a jackass I was, because I let myself get suckered by a good salesman. There were five no-load funds with excellent past records that I was considering. If I had bought them, I’d be way ahead. But no, I listened to that dumb broker and bought Merrill Lynch funds. Actually, to use your phrase, he was “an articulate incompetent.” Now I want to invest $100,000 into nine different mutual funds, each with a different investment emphasis. I want to be able to look at a 20-year performance record rather than a five-year or 10-year performance. I want to invest in the following disciplines: a sector fund, an international fund, mid-size growth, mid-size blend, mid-size value, a hybrid fund, a large-cap growth, large-cap value and large-cap blend. I’d really appreciate your recommendations.
S.N., Vail, Colo.
Dear S.N.:
Wall Street’s ridiculously silly assertion that “past results are no indication of future performance” is used as a shotgun to shoot down nicely performing competitive funds so brokers can peddle their firm’s proprietary, high-commission, underperforming mutual funds.
Merrill Lynch, Smith Barney, Oppenheimer, Charles Schwab, Morgan Stanley, Lehman Brothers, Goldman Sachs and other Big Board firms have their own proprietary funds and charge investors a 5 percent commission plus terribly high annual fees. The performance of these brokerage house mutual funds over the past 10, 15 and 20 years has been seedy, shameful and risible compared to the numerous no-load, low-expense-ratio funds that can be bought via a toll-free phone call.
As a securities attorney recently told me, Merrill and other brokerages, knowing the performance of their funds can’t hold a candle to the competition, instruct their salespeople to tell investors “past results are no indication of future performance.” Well, that’s pure tommyrot, terradiddle and twaddle. Were that true, why would scholars devote so much time to studying the lessons of history? Frankly, there’s no way you would purchase a brokerage house mutual fund if you considered its past history as a guide to future performance.
Brokerages such as Oppenheimer and Smith Barney charge their investors an arm, a leg plus other important body parts to buy their proprietary funds, and in return these suckers get subpar performance. It is a sad reality for Wall Street that few (if any) of the mutual funds owned and managed by the Street’s brokerage firms earn a top listing in their specific investment categories for any 10-, 15- or 20-year period.
It’s logical to conclude that the poor performance of the mutual funds owned by any of the Street’s brokers says a lot about those firms’ investment skills. Still, most brokerages give their salesmen real nice “attaboys” if they show good successes in selling their employers’ lousy mutual funds. Those lousy proprietary funds are a very significant source of revenues for the brokerage industry.
Now here’s a list of no-load, low-cost mutual funds. Each of these funds ranks among the top 10 in its category for a 20-year investment time frame. And each has an average annual total return over 20 years of at least 10 percent. Make your selection knowing that there isn’t a brokerage house mutual fund whose performance can match these.
Regional Country Funds
Blackrock EuroFund B and Fidelity Europe have 20-year AATRs of 10.5 percent and 10.3 percent, respectively.
Sector Funds
Vanguard Health Care and Fidelity Select Insurance have AATRs of 17 percent and 14.7 percent, respectively.
Large-cap value funds
T. Rowe Price Equity Income and Vanguard Windsor II have AATRs of 11.9 percent and 12 percent, respectively.
Large company growth funds
Fidelity Capital Appreciation and Fidelity Contrarian have AATRs of 11.4 percent and 14.6 percent.
Large company blend funds
Mairs & Power Growth and Davis New York Venture have AATRs of 14.1 percent and 13.6 percent.
Hybrid funds
Fidelity Convertible and T. Rowe Price Capital Appreciation have AATRs of 13.3 percent and 12.5 percent.
Diversified international funds
Fidelity International Discovery and Vanguard International Value have AATRs of 10.1 percent and 10 percent.
Mid-cap blend funds
Ariel and Gabelli Asset AAA have AATRs of 13.2 percent and 13.4 percent, respectively.
Mid-cap growth funds
Meridian Growth and Brandywine fund have AATRs of 13.3 percent and 12.5 percent.
Mid-cap value funds
Heartland Value and Fidelity Value have AATRs of 14.1 percent and 12.9 percent.
You now have a list of 18 no-load funds that have the best records in their respective categories. Invest $5,500 in each fund, and I’m comfortable suggesting that there isn’t a brokerage house mutual fund that can hold a candle to the result.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service
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