The funds you probably own

For all the ink that’s been spilled about small, undiscovered mutual funds, most people simply own the ones that are in their 401(k) savings plan. And, by and large, those are very big, long-ago discovered funds.

This is not a bad thing, necessarily. Some funds, like Fidelity Contrafund or the American Funds Growth Fund of America, have gotten big because they have had good returns over time. Others, such as Fidelity Magellan, are big because they once had had good performance, but shareholders haven’t become entirely disillusioned.

So how well is your big fund doing? On average, reasonably well in this kidney stone of a market. The table below gives you the answer. Skip below the table for a few observations.

Name Ticker Morningstar Category Total return (YTD)
Vanguard Total Stock Mkt Idx Inv VTSMX  Large Blend 2.5%
Vanguard 500 Index Inv VFINX  Large Blend 2.4%
Vanguard Institutional Index I VINIX  Large Blend 2.5%
American Funds Growth Fund of Amer A AGTHX  Large Growth 6.4%
Fidelity® Contrafund® FCNTX  Large Growth 7.7%
Fidelity Spartan® 500 Index Inv FUSEX  Large Blend 2.4%
American Funds Washington Mutual A AWSHX  Large Value 0.1%
American Funds Invmt Co of Amer A AIVSX  Large Blend 1.9%
American Funds Fundamental Invs A ANCFX  Large Blend 3.3%
Vanguard Mid Cap Index I VMCIX  Mid-Cap Blend 3.9%
Dodge & Cox Stock DODGX  Large Value 0.7%
Vanguard Small Cap Index Inv NAESX  Small Blend 2.1%
Vanguard Growth Index Inv VIGRX  Large Growth 5.2%
Vanguard Windsor™ II Inv VWNFX  Large Value 1.1%
American Funds AMCAP A AMCPX  Large Growth 4.5%
T. Rowe Price Growth Stock PRGFX  Large Growth 11.6%
Vanguard PRIMECAP Inv VPMCX  Large Growth 1.5%
Vanguard Extended Market Idx Inv VEXMX  Mid-Cap Blend 2.9%
Fidelity® Low-Priced Stock FLPSX  Mid-Cap Value 4.1%
Fidelity® Growth Company FDGRX  Large Growth 8.2%
Vanguard Instl Ttl Stk Mkt Idx InstlPls VITPX  Large Blend 2.6%
Vanguard Value Index Inv VIVAX  Large Value 0.2%
American Funds American Mutual A AMRMX  Large Value -0.2%
MFS® Value A MEIAX  Large Value 2.1%
Fidelity Spartan® Total Market Idx Inv FSTMX  Large Blend 2.6%

Source: Morningstar.

So far this year, the Standard and Poor’s 500 stock index has gained 2.5%, including reinvested dividends. The 25 largest funds have gained 3.3%.

A few observations:

Growth funds have beaten value — not just this year, incidentally, but the past five. The standout in this particular table is T. Rowe Price Growth stock, a $47 billion giant that has beaten the S&P 500 for a decade and ranks in the 15th percentile or above in its category during the entire period. Its largest holdings: Amazon, Priceline and Visa, accounting for about 10% of the fund’s assets. The one drawback to the fund: Current manager Joe Fath has been at the helm for about a year and a half. (He’s been with T. Rowe since 2002.)

Value funds have been laggards. You shouldn’t be surprised by this: It’s the sixth year of a bull market and few stocks are cheap, relative to earnings. Few of the big value funds have significant cash on the sidelines: They’re paid to be fully invested, so one has to presume that managers are holding their noses and buying the cheapest stocks they can find in an expensive market.

The one exception is Fidelity Low-Priced stock, which has a cash stash of about 9%. The fund is arguably the most eclectic and diverse of the group, with 52% of its assets in U.S. stocks and 39% abroad.

By and large, you don’t have much choice when it comes to the funds in your work-sponsored retirement plan. And in most cases, you’ll get big funds with a good track record — not the best way to choose funds, but again, you don’t have much choice. But remember this: Unless you’re on the verge or retirement, it’s probably better to get the right amount of your savings in a mediocre stock fund than it is to have too much in cash or bonds.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s