Questions from Investors — Mutual Fund Performance

Q:     Why did my mutual funds only go up 5.5% per year during the last two years?

A:     You probably own money market funds, bond funds, S&P 500 funds, or poorly performing stock mutual funds.

Money market interest rates and bond interest rates have been very low.  There are no current prospects for those investment categories to perform well.  In fact, when interest rates rise, bond prices fall, so the anticipation of rising interest rates would be a catalyst for an investor to SELL bond funds, not to buy them.

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The S&P 500 index grew less than one-tenth of one percent in 2011, and a little over 13% in 2012.  Index funds therefore grew, on average, 6% per year after fees during those two years.

However, any good growth stock mutual fund should be able to outperform the S&P 500 index.  If you’re a mutual fund manager or an experienced stock portfolio investor, like myself, outperforming the S&P 500 index is not difficult.  All four Goodfellow LLC stock portfolios outperformed their comparable market indices in 2012, with the Growth Stock Portfolio more than doubling the S&P 500’s performance.

If your goal is stock mutual fund investing, and you want better returns than the S&P 500 performance, do a mutual fund exchange within your mutual fund family.  This works in many taxable accounts, IRAs, business retirement accounts such as 401(k)s, and annuities.  You can often make the exchange from one mutual fund to another without incurring fees.  Caveat:  mutual fund exchanges in taxable accounts will generate a taxable event which you will need to report to the I.R.S. when you file Federal Income Taxes.

Send additional questions to research@goodfellowllc.com.

Happy investing!

 

Crista Huff

President

Goodfellow LLC

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Goodfellow LLC and its employees are not paid by third parties to promote nor disparage any investment. Recommendations are based on hypothetical situations of what we would do, not advice on what you should do.

Neither Goodfellow LLC nor its employees are licensed investment advisors, tax advisors, nor attorneys. Consult with a licensed investment advisor and a tax advisor to determine the suitability of any investment.

The information provided herein is obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. When information is provided herein from third parties — such as financial news outlets, financial websites, investment firms, or any other source of financial information – the reliability or completeness of such financial information cannot be guaranteed.

The information contained on this website is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities. This is not an offer or solicitation for any particular trading strategy, or confirmation of any transaction. Statements made on the website are based on the authors’ opinions and based on information available at the time this page was published. The creators are not liable for any errors, omissions or misstatements. Any performance data quoted represents past performance and past performance is not a guarantee of future results. Investments always have a degree of risk, including the potential risk of the loss of the investor’s entire principal. There is no guarantee against any loss.

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