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.