Mutual Funds

Put-Selling ETF Takes Junk Out

twocents@thestreet.com (Gregg Greenberg) — Mon, 13 May 2013 18:49 GMT

Rich Investment Solutions founder Kevin Rich explains why the US Equity High Volatility Put Write Index ETF beats junk bond funds.

Finding the Best College Savings Plans

twocents@thestreet.com (Stan Luxenberg) — Mon, 13 May 2013 14:22 GMT

NEW YORK (TheStreet) -- Faced with steep tuition bills, investors have been pouring money into 529 college savings plans.

In 2012, assets in the plans grew 25% to $166 billion, according to Morningstar. Under the savings program, parents or friends of a child can invest in a fund and owe no taxes on the earnings, provided the money is used to pay tuition bills.

The 529 program can be a valuable resource for people who face tuition costs. But investors must shop carefully. Many of the investment choices are expensive and have delivered uninspiring returns. According to Morningstar, the average 529 investment has underperformed conventional mutual funds. During the five years ending in January, the average mutual fund in the conservative allocation category -- which holds a mix of stocks and bonds -- returned 4.3% annually, compared to 3.7% for comparable 529 funds. ...

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Small Dividend Stocks Deliver Hefty Returns

twocents@thestreet.com (Stan Luxenberg) — Fri, 10 May 2013 14:32 GMT

NEW YORK (TheStreet) -- Searching for income, investors have been pouring into exchange-traded funds that hold big dividend-paying stocks. A favorite choice is Vanguard High Dividend Yield ETF , which yields 2.9%. But you can get more income with two ETFs that invest in smaller stocks: WisdomTree SmallCap Dividend , which yields 3.7%, and WisdomTree MidCap Dividend , with a yield of 3.2%.

Besides solid dividends, the WisdomTree funds have also delivered strong total returns. During the past five years, the small-cap fund returned 8.9% annually, compared to 5.5% for the S&P 500 and 7.7% for iShares Russell 2000 ETF. WisdomTree Midcap returned 9.4% annually, compared to 7.3% for iShares Russell Midcap .

Not many funds focus on small-cap dividend stocks. When they seek income, investors prefer funds that hold familiar mega-cap dividend payers, such as Exxon Mobil and Johnson & Johnson . Small-cap companies are often seen as more volatile and less likely to deliver stable income. But even though small stocks can be volatile, they have a long track record for generating compelling results. ...

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One Size Doesn't Fit All

twocents@thestreet.com (Ruben Ramirez) — Thu, 09 May 2013 20:16 GMT

When it comes to alternative investment products one size doesn't fit all, says Bob Rice, Author of "The Alternative Answer."

Funds That Win by Placing Big Bets

twocents@thestreet.com (Stan Luxenberg) — Mon, 29 Apr 2013 14:30 GMT

NEW YORK ( TheStreet ) -- In recent years, Fairholme Fund has swung wildly up and down. In 2010, Fairholme returned 25.5%, outdoing the S&P 500 by 10.4 percentage points and topping 99% of its large value peers, according to Morningstar.

The next year, Fairholme lost 32.4% and finished dead last of the 373 competitors in its category. In 2012, the fund came in first. Long-term investors have little reason to complain. During the past 10 years, Fairholme has outdone 99% of its peers. But masses of shareholders have dumped the fund, unnerved by the volatility. Assets have dropped from $18.8 billion in 2010 to $7.6 billion now.

Fairholme portfolio manager Bruce Berkowitz has achieved the high returns and extreme volatility by maintaining a concentrated portfolio. While the average large value fund holds a diversified portfolio with more than 100 stocks, Berkowitz keeps most of his portfolio in 10 unloved stocks. ...

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Getting Big Returns From Tiny Stocks

twocents@thestreet.com (Stan Luxenberg) — Thu, 25 Apr 2013 14:25 GMT

NEW YORK (TheStreet) -- Not many mutual funds hold micro-cap stocks -- small companies with market values of less than $500 million. The tiny stocks can be hard to trade and prone to periodic crashes.

But micro-caps can be worthwhile holdings, says Hal Ratner, a chief investment officer of Morningstar Investment Management. The smallest stocks sometimes diversify portfolios and deliver winning returns, Ratner says.

To appreciate the potential rewards and risks, consider Aegis Value , a micro-cap specialist. During 2008, the mutual fund lost 51.4%, trailing the S&P 500 by 14 percentage points, according to Morningstar. But the next year, Aegis skyrocketed, gaining 91.4%, topping the S&P 500 by 64 percentage points. The periods of outperformance often compensate for the occasional disappointing years. During the past 10 years, micro-caps returned 12.1% annually, compared to 8.5% for the S&P 500, according to Morningstar/Ibbotson. "Micro-caps can be volatile, but they can give you the potential for strong returns," says Hal Ratner of Morningstar. ...

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Top Returns From 'Wide-Moat' Stocks

twocents@thestreet.com (Stan Luxenberg) — Mon, 22 Apr 2013 14:46 GMT

NEW YORK ( TheStreet ) -- Warren Buffett has long talked about the virtues of businesses with "moats."

Such companies rely on strong brands or other advantages to defend their markets from encroachments of rivals. Buffett's favorites include Coca-Cola and American Express .

Can wide-moat stocks outperform the markets? Maybe so. Several wide-moat ETFs have delivered solid returns. Among the most promising choices are two products that track a Morningstar index, ELEMENTS Morningstar Wide Moat Focus ETN and Market Vectors Wide Moat ETF . During the past five years, the Elements ETN returned 10% annually, compared to 4.6% for the S&P 500, according to Morningstar. ...

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Equity Investing Is Alive and Well

twocents@thestreet.com (TheStreet Guest Contributor) — Fri, 19 Apr 2013 20:38 GMT

NEW YORK (WisdomTree) -- Conventional wisdom says we are living in a fixed income world. Fear and uncertainty in the markets have crowded investors into areas of perceived safety, such as money market funds, U.S. Treasuries, investment-grade bonds and even cash.1 Despite an aging population's need for income and capital appreciation, many say there is simply no appetite for stocks.

To be fair, these have been challenging and volatile markets for investors. And they have been lean years for the mutual fund industry. Over the last six years, mutual funds haven't seen one net new dollar in equities. To the contrary, they have experienced $354 billion in equity outflows since 2006.2 No wonder the traditional mutual fund firms are hoping for brighter days.

Don't call it a comeback. ...

A REIT and Fund Company With a Low Profile

twocents@thestreet.com (Marc Courtenay) — Wed, 17 Apr 2013 10:00 GMT

NEW YORK (TheStreet) -- On Wednesday, after the markets close, the financial world will learn the latest earnings news on a company that's received little fanfare.

Cohen & Steers may deserve a place on our "watch list" for a number of reasons. Since its inception in 1986 the New York City-based firm operates as an investment manager in the United States, Japan and elsewhere internationally. It has offices in London, Brussels, Hong Kong, Tokyo and Seattle and serves institutional and individual investors around the world

CNS focuses on global real estate securities, global-listed infrastructure, real assets, large-cap value stocks and preferred securities. It primarily manages institutional accounts, open-end mutual funds, and closed-end mutual funds. ...

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Media Stocks Offer Dynamic Opportunities

twocents@thestreet.com (Gregg Greenberg) — Tue, 16 Apr 2013 18:48 GMT

Media and healthcare stocks are fertile ground for dynamic opportunities, Marc Pinto, portfolio manager for the Janus Balanced Fund, tells Gregg Greenberg.

A New Mutual Fund for Rough Markets

twocents@thestreet.com (Stan Luxenberg) — Mon, 15 Apr 2013 14:41 GMT

NEW YORK (TheStreet) -- BBH Core Select is one of the most impressive mutual funds of recent years. During the past decade, the fund, which is operated by Brown Brothers Harriman, returned 10.5% annually, outdoing the S&P 500 by 4 percentage points, according to Morningstar.

Besides delivering exceptional returns, this mutual fund was one of the least volatile members of the large blend category as measured by an indicator called standard deviation.

BBH's most outstanding performance came in the turmoil of 2008 when the fund topped the S&P 500 by 15 percentage points and ranked as the top performer in its group. ...

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Municipal Funds That Pay Rich Yields

twocents@thestreet.com (Stan Luxenberg) — Thu, 11 Apr 2013 14:41 GMT

NEW YORK ( TheStreet ) -- With the Federal Reserve keeping a lid on interest rates, 10-year Treasuries yield a skimpy 1.75%. For a better payout, consider high-yield municipal funds. According to Morningstar, the average fund in the category yields 4.2% tax-free. That is the equivalent of a taxable bond that yields more than 7% for high-income investors. Make no mistake, high-yield municipals are riskier than Treasuries. But at a time when municipal finances are strengthening, the high-yield funds should produce reliable income.

The high-yield funds invest in tax-free debt from states, cities and other issuers. The high-yield municipal funds should not be confused with the better-known high-yield bond funds, which hold taxable corporate bonds. The taxable funds invest almost exclusively in junk bonds that are rated below-investment grade. The junk securities pose clear risks of default. In 2012, 2.6% of junk issues defaulted, according to Moody's. The historical average default rate is 4.8%. In contrast, only a handful of municipal issuers default every year. In 2012, five of the approximately 50,000 issuers defaulted.

High-yield municipal funds limit their risk by diversifying portfolios and holding some high-quality bonds. The typical fund has about one third of assets in bonds that are rated below-investment grade or unrated. Another third are in securities rated BBB, the lowest category of investment-grade issues. A final third are rated A or higher. Because they hold some high-quality issues, high-yield municipal funds tend to be less volatile than their high-yield corporate counterparts. >>Also see: Netflix Jumps on Love From Goldman Sachs >> ...

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Searching for Yield? Try Closed End Funds

twocents@thestreet.com (Gregg Greenberg) — Thu, 04 Apr 2013 15:37 GMT

If you are looking for yield, don't forget closed end funds, Kevin Mahn, CIO of Hennion & Walsh, tells Gregg Greenberg.

Mutual Funds That Can Survive Downturns

twocents@thestreet.com (Stan Luxenberg) — Wed, 03 Apr 2013 14:01 GMT

NEW YORK (TheStreet) -- Mutual fund shareholders have good reason to cheer. During the past three months, the S&P 500 has returned 10.5%. Now some investors worry that the market is due for a correction.

The bears fear that trouble in Europe or gridlock in Washington could send stocks tumbling. Should you trim your stocks and take shelter? Not yet. Profits are climbing, and the forward price-earnings ratio of the S&P 500 is 13.2, a figure that is less than the long-term average.

But conservative investors should consider buying a steady fund that can limit losses in downturns. Top choices include American Beacon Holland Large Cap Growth , ASTON/TAMRO Diversified Equity and Manor . ...

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Salmon: Annals of Gender Diversity, Pimco Edition

twocents@thestreet.com (Felix Salmon) — Mon, 01 Apr 2013 22:09 GMT

NEW YORK (Reuters Blogs) -- Over the past three years or so, Pimco has been making a concerted effort with respect to gender equality and women's empowerment. And this effort is being led from the very top: check out CEO Mohamed El-Erian's speech to USAID last year, or his more recent rave review of Sheryl Sandberg's book. El-Erian is clearly committed to overcoming institutional biases at Pimco and to ensuring that his company "employs, enables, develops, stimulates, and retains" the very best workforce it can -- including, of course, the very best women.

So, how's that working out for him? Google "Pimco leadership" and you end up at this page, which lists the firm's "Global Executive Leadership" as well as all of its managing directors. The former list has six names on it; all of them are men. The latter list is longer -- some 58 names. And if you look closely, you should be able to find seven women there, alongside 51 men.

This is the face that Pimco shows to the rest of the world, and it's incredibly male-dominated. Internally, the numbers aren't much better. The two most important committees at Pimco are the investment committee and the executive committee; neither of them has ever had more than one woman. And if you look at Pimco's professionals more generally, everybody with a job title of "vice president" or above, the total proportion of women is 23% -- which is exactly the same as it was three years ago, when the current diversity exercise began. ...

Can ETFs Help Reduce Taxes?

twocents@thestreet.com (Stan Luxenberg) — Mon, 01 Apr 2013 14:25 GMT

NEW YORK ( TheStreet -- With April 15 approaching, plenty of investors are faced with painful bills. The healthy markets of the past year produced ample taxable capital gains.

To limit the damage, many financial advisers recommend exchange-traded funds because of their tax efficiency. The praise may be warranted for big equity funds, which can help to control taxes over the long term. But in recent years, many ETFs have not been as tax efficient as comparable mutual funds.

Morningstar analyst Michael Rawson cautions tax-conscious investors to be particularly wary about bond ETFs. "In theory, bond ETFs should have a tax edge, but in practice we have not seen evidence of that," he says. Also see: How to Get the Most Out of Your Tax Refund ...

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2 Winning Large-Growth Mutual Funds

twocents@thestreet.com (Stan Luxenberg) — Mon, 25 Mar 2013 14:20 GMT

NEW YORK (TheStreet) -- Mutual funds in the large-growth category have taken investors on a rough ride in recent years.

During the turmoil of 2008, the average fund in the group lost 40.7%, lagging the S&P 500 by 3.7 percentage points, according to Morningstar. As investors worried about the euro crisis in 2011, the funds lost 2.5%, trailing the S&P by more than 4 percentage points.

For steadier performance, consider two intriguing mutual funds, Gerstein Fisher Multi-Factor Growth Equity and Rydex S&P 500 Pure Growth . The funds have outdone their average peers and excelled in downturns. While they follow different strategies, both funds have succeeded by tilting toward the smaller members of the large-growth stock universe. ...

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Bond Funds That Should Lead the Pack

twocents@thestreet.com (Stan Luxenberg) — Fri, 22 Mar 2013 14:40 GMT

NEW YORK ( TheStreet ) -- Bond funds have faced headwinds this year. While the Barclays Capital U.S. Aggregate bond index has dropped 0.2%, long government bonds funds declined 3.0%, according to Morningstar.

The red ink can be traced to rising interest rates. Since the beginning of the year, yields on 10-year Treasuries have climbed from 1.78% to 1.96%. That has caused pain because bond prices tend to fall when rates climb.

But not all funds have suffered. Among the leaders lately are unconstrained bond funds. These have the freedom to buy a wide range of securities and employ strategies that can prosper when most bonds are sinking. ...

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Top Mutual Funds to Beat the Taxman

twocents@thestreet.com (Gregg Greenberg) — Wed, 20 Mar 2013 17:09 GMT

Mairs & Power Growth Fund and the Vanguard FTSE All World-Ex US ETF are just two of the most tax efficient mutual funds, Todd Rosenbluth, Analyst at S&P Capital IQ, tells Gregg Greenberg.

P&G, Intel Offer More Than Dividends

twocents@thestreet.com (Gregg Greenberg) — Tue, 19 Mar 2013 18:42 GMT

Intel, P&G and Becton Dickinson offer more than steady dividend payments, Erich Patten, Cutler Equity Fund portfolio manager, tells Gregg Greenberg.

Citigroup, Blackstone Ready to Break Out

twocents@thestreet.com (Gregg Greenberg) — Tue, 19 Mar 2013 17:49 GMT

Citigroup, Blackstone and Nationstar are financial stocks poised to break out, David Ellison, Hennessy Large Cap Financial fund portfolio manager, tells Gregg Greenberg.

Hit Retirement Target With LifePath Funds

twocents@thestreet.com (Gregg Greenberg) — Tue, 19 Mar 2013 15:57 GMT

Investors seeking professional managers to regularly reallocate their retirement portfolios should consider LifePath funds, Joe Monk, Sr. VP. at State Farm, tells Gregg Greenberg.

High-Flying Mutual Funds That Crashed

twocents@thestreet.com (Stan Luxenberg) — Fri, 15 Mar 2013 14:58 GMT

NEW YORK ( TheStreet ) -- Investors have been racing to dump two notable mutual funds: Artio International Equity and CGM Focus . Assets at Artio have fallen from $10.9 billion in 2007 to $753 million now. During the same time, the CGM portfolio fell from $5.4 billion to $1.5 billion. Terrible performance records caused the exodus. During the past five years, CGM lost 7.5% annually, ranking dead last of the 444 large blend funds tracked by Morningstar. Artio lost 5.4% and trailed 96% of its foreign large blend peers.

The sorry performance is especially noteworthy because the funds once ranked as high flyers. At the end of 2007, both funds boasted performance records that were among the greatest ever compiled. In the preceding decade, CGM returned 26.1% annually, compared to 5.9% for the S&P 500. Artio returned 17.2% annually, compared to 8.7% for the MSCI EAFE international index.

What went wrong? Both funds follow unorthodox strategies that worked until the financial crisis disrupted markets. Diehard contrarians, the managers failed to perform in the downturn when the cheapest stocks only got cheaper. In recent years, the cold streak continued. ...

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Enjoy Dow Rally But Don't Ignore Emerging Markets

twocents@thestreet.com (Gregg Greenberg) — Thu, 14 Mar 2013 17:43 GMT

Emerging markets still offer huge opportunities regardless of the rally in U.S. stocks, Rodolfo Martell, Portfolio Manager for the Blackrock Emerging Markets Long/Short Equity Fund, tells Gregg Greenberg.

Mutual Funds Profit From Merger Spree

twocents@thestreet.com (Stan Luxenberg) — Thu, 07 Mar 2013 14:32 GMT

NEW YORK (TheStreet) -- Corporations are going shopping. The volume of mergers and acquisitions has been increasing, with big deals making headlines, including offers for H.J. Heinz and Dell . All the activity is welcome news for mutual funds that specialize in merger arbitrage. The funds buy stocks that are about to be acquired.

During the financial crisis, deal activity slowed, and some funds were forced to hold fixed-income while they waited for takeover activity to resume. With deals plentiful now, the funds can choose from among many stocks to buy.

In the current positive environment, merger funds are likely to return 4% to 5% this year, say fund portfolio managers. That might sound like a modest result. But merger funds can be attractive investments because they deliver steady results while being only about as volatile as intermediate-term bond funds. "With the merger arbitrage funds, you can get returns in the mid-single digits -- and maybe a little higher in a favorable environment," says Chris Sawyer, a research analyst for Litman Gregory. ...

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Why Hedge Funds Are Lagging

twocents@thestreet.com (Stan Luxenberg) — Wed, 06 Mar 2013 15:41 GMT

NEW YORK ( TheStreet) -- At a time when stocks are soaring, hedge funds have lagged. In the past year, exchange-traded funds that aim to replicate hedge funds delivered modest results. IQ Hedge Multi-Strategy Tracker returned 1.2%, compared to 13.9% for the S&P 500, according to Morningstar.

But the weak performance has not discouraged some investors. The IQ ETF recorded $132 million inflows in the past year, according to IndexUniverse.com. That is a sizable inflow for a fund with $343 million in assets. Other ETFs that have reported inflows include IQ Hedge Macro Tracker and ProShares Hedge Replication .

Like the ETFs, the hedge funds themselves have been reporting inflows. In 2012, hedge funds attracted $34 billion in assets, raising the industry's total capital to a record $2.3 trillion, according Hedge Fund Research. >>>>Also see: 4 Stocks Spiking on Big Volume ...

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Smarter Money To Boost BlackRock Amid S&P 500 Surge

twocents@thestreet.com (Antoine Gara) — Tue, 05 Mar 2013 19:02 GMT

NEW YORK (TheStreet) -- BlackRock may be poised for rising profits as smarter money enters the stock market, amid expectations that the Dow Jones Industrial Average and the S&P 500 will gain on record highs tested in March.

The key for BlackRock -- the world's biggest money manager -- is that as stock indexes test new highs, corporate earnings continue to rise and the likes of Warren Buffett characterize U.S. stock markets as the best place to invest, investors might simply choose to put their money into passively managed mutual funds and exchange traded funds that generally beat actively managed peers.

A majority of equity market inflows into funds that replicate the S&P 500 or more specialized indexes targeted at specific sectors, market caps or regions, may indicate the herd of money moving into equity markets in recent months isn't as dumb as some may think. ...

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Vanguard's Formula for Beating Mutual Fund Benchmarks

twocents@thestreet.com (Stan Luxenberg) — Mon, 25 Feb 2013 17:00 GMT

NEW YORK (TheStreet) -- In recent years, investors have poured into Vanguard Group's index mutual funds.

Since 2008, assets in Vanguard Total Stock Market Index have more than doubled to $225 billion. At the same time, some shareholders have pulled money out of Vanguard's actively managed mutual funds.

Funds that have suffered outflows include Vanguard Windsor II and Vanguard Capital Opportunity . ...

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Obamacare Boosts Health Sector

twocents@thestreet.com (Stan Luxenberg) — Fri, 22 Feb 2013 16:09 GMT

NEW YORK ( TheSTreet ) -- As Congress labored to pass Obamacare in 2009 and 2010, health stocks lagged the markets. Investors feared that the mammoth legislation would force health insurers to cover sick people, a process that would pinch profits. Pharmaceutical companies would be hurt by new fees that had been designed to cover the costs of the legislation. In addition, the complicated process created uncertainty, which unnerved investors and depressed even stocks that seemed likely to benefit as millions of consumers gained health insurance.

These days the picture looks brighter. With some of the uncertainty gone, health stocks have been climbing. During the past year, health funds returned 20.7%, outpacing the S&P 500 by 7 percentage points, according to Morningstar. Can the rally continue? Yes, say some mutual fund managers. They argue that Obamacare will provide a boost to some companies while inflicting only limited damage on insurers.

For years, health has been a growth sector. With demand for services increasing relentlessly, health funds returned 10.7% annually, during the past ten years, outpacing the S&P 500 by 2 percentage points. Health stocks were particularly appealing because they often showed defensive characteristics, outdoing the S&P in down markets. Obamacare will enable the health sector to continue performing much as it did in the past, says Eddie Yoon, portfolio manager of Fidelity Select Health Care . "As utilization of services continues increasing, this will still be a growth sector that is recession resistant," Yoon says. ...

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Here's Why Your Old Asset Allocation Isn't Working

twocents@thestreet.com (Gregg Greenberg) — Thu, 21 Feb 2013 20:08 GMT

Steve Blumenthal, CEO of CMG Capital Management, says investors should scrap their old stock/bond asset allocations and add alternatives.