A Modest End to a Good Year Most mutual fund categories experienced modest gains in the fourth quarter, achieving average returns of 2.2% or less. Though the final quarter’s performance may have been unimpressive, the full-year data tells a different story. Approximately half of the categories tracked by this newsletter delivered an average return of…
Commentary: “A Modest End to a Good Year” — Most mutual fund categories experienced modest gains in the fourth quarter, achieving average returns of 2.2% or less. Read more »
If you held onto a mutual fund throughout the third quarter, it is likely that you made money. Almost every category we track had an average positive return last quarter. The sole exception was contra stock market mutual funds that bet against the stock market; they lost 8.1% on average, as would be expected for a period when the major indexes rose.
Stock funds mostly outperformed their bond counterparts. Two equity categories posted double-digit gains and a third stock fund category was just shy of a 10% gain. Many bond fund categories posted more modest returns. Four bond categories had returns of 1.0% or less—still positive, but not by much.
Mutual fund investors are constantly warned against chasing short-term performance, and the dangers of doing so were exemplified in the second quarter. What worked very well in the first quarter, didn’t work well in the second quarter. Conversely, some of the first quarter’s worst-performing categories were the best-performing categories in the second quarter.
A renewed focus on the European sovereign crisis combined with worries of a global economic slowdown caused many investors to adopt a more defensive stance. Many investors sought safety in government bond funds and dividends in less economically sensitive utility stock funds.
Commentary: Rally Propels Tech and Financial Funds
The first-quarter rally in stock prices led to double-digit gains in most stock fund categories. Technology and financial/banking sectors were particular standouts, with both sectors realizing average gains of nearly 20%.
Commentary: Bond Funds Gain; Stock Funds Falter
Bond funds saw their total returns increase further in the fourth quarter, capping off a strong 2011. Nearly every bond fund category made shareholders wealthier last year, with five categories generating double-digit returns. Only convertible bond and currency international bond funds posted average negative rates of return.
You can keep tabs on the funds you own or are considering with AAII’s Quarterly Mutual Fund Update. Each issue includes a commentary by Charles Rotblut, AAII Journal Editor, that provides an overview of the reported quarter and quick synopsis of the markets behavior. [More…]