I wouldn't touch these funds with a ten-foot pole.
By
Russel Kinnel |
04-18-02 |
06:00 AM |
E-mail Article
There are a heck of a lot of funds out there. We've got about 6,000 open-end funds in our database (not counting multiple share classes of the same fund). That can be daunting for the investor looking to narrow the field to a manageable list of buy candidates. A couple of years ago, we created our
Fund Analyst Picks list to help you start off with a list of the very best funds around. You told us that was great, but you'd also like a little more guidance regarding which funds to avoid or sell. Today, we've launched our
Fund Analyst Pans list to help you out. (Like our Fund Analyst Picks, Fund Analyst Pans are only available to Premium Members. If you'd like to try a Premium Membership free for 30 days, click
here.)
About the Author
Russel Kinnel is Morningstar's director of mutual fund research. He is also the editor of
Morningstar FundInvestor, a monthly newsletter dedicated to helping investors pick great mutual funds, build winning portfolios, and monitor their funds for greater gains. Kinnel would like to hear from readers, but no financial-planning questions, please.
A pan is a fund with no compelling reason to buy; if you own it, you should consider selling. We look for poor management, high costs, poor performance, or just bad strategies when building our pans list. Some pans are complete dogs and others are simply below-average funds without any strong suits.
We only pan funds that are on our coverage lists because we want to be sure we know the whole story. However, our 2,000-fund coverage list generally covers the bigger and better funds out of the 6,000 total. Thus, many dogs won't make the list simply because they're so crummy we don't cover them. (A lucky break for Ameritor funds!)
You can see all the pans when you check out the list. But in the meantime, I'll highlight a few:
Berkshire Focus BFOCX
This fund's -72% loss last year pretty much says it all. If you'd invested $10,000 in the fund when it was launched in 1997, you'd be down to about $9,700 compared with $15,600 for the average tech fund and $13,800 for the S&P 500. On top of that, you'd get charged a pricey 1.95% expense ratio. Manager Malcolm Fobes makes bold bets on tech industries that sometimes pay off but not enough to reward investors for the risk. This year, the fund's top three holdings, all networking plays, have suffered double-digit losses.
AIM Euroland Growth GTGEX
This fund suffers from a strategy that sounds like it was dreamed up by marketers--not managers. The idea is that the fund would take advantage of Europe's currency conversion by investing in countries that have adopted the euro. That sounds good, but do you really want a Europe fund that doesn't invest in the United Kingdom or Switzerland? You'd be missing some of the leading pharmaceutical and financials companies.
IPO Plus Aftermarket IPOSX
Boys, it don't get much more cyclical than this. With initial public offerings, it's always feast or famine. When IPO shares are rallying, investment bankers will back up the truck and unload as many companies on the market as they can until the market gags. Then IPOs enter a prolonged downturn and hardly anything is taken public. Kind of like now. So, again this fund is more concept than investing strategy. In addition, management doesn't appear to have any special access to IPOs when the market is hot. Expenses are a steep 2.50% and performance has been dismal.
Update
Ameristock Focused Value
has closed to new investors. As you may recall, this is the fund with ambitions of being a corporate-investment vehicle rather than an open-end fund.
Poll Results
On Monday, I asked if Maryland Public Television should have kept Louis Rukeyser as host of Wall Street Week and 56% of you said, "YES!" Last week,
I asked which fund would perform best over the next five years: Fidelity Disciplined Equity, Vanguard Growth & Income, Vanguard 500 Index, or Phoenix-Oakhurst Growth & Income. You Bogleheads gave Vanguard 500 the victory with 46% of the vote. Finally, also last week
I asked what returns you expected the market to produce over the next 20 years and the old standard of 10% annualized won out with 48% of the vote.
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