Dont dwell on your losses. Focus on things you can control, like investing costs and consistency. Thats what the MONEY 70 will help you do.
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ByPenelope Wang, Money Magazine senior writer
(Money Magazine) — Could 2008 have been any worse for fund investors? As we went to press, not a single stock fund made money, and defying the laws of diversification, many bond funds fell too. Still, the MONEY 70, our recommended list of mutual and exchange-traded funds, held up better than most. More than 60% of our actively managed funds ranked in the top half of their categories last year; over the past five, 83% beat their peers.
Of course, category-trouncing performance isnt the mission of the MONEY 70, since no one can predict future returns. Instead, we provide a mix of high-quality funds – including index funds and ETFs – which you can use to build a diversified portfolio. We stick with the criteria that matter most, like low fees, which let you keep more of your returns. When it comes to actively managed funds, we also look for consistent strategies and experience. And we care how well funds treat their shareholders. So we pay attention to Morningstars stewardship grades, which rate such factors as a fund groups culture and regulatory history. As for performance, we focus on funds that rank in the top half of their peers over five years but make exceptions when a managers style is out of favor.
This year were making only two switches. First, were dropping Matrix Advisors Value because its assets slipped below our $100 million minimum. Funds that small pose a greater risk of raising fees or merging. If you own it, though, theres no reason to sell. Were then adding Allianz NFJ Small Cap Value, a fund that invests in dividend-paying small stocks and that recently reopened. Were also bringing back a former MONEY 70 fund that reopened, Third Avenue Small Cap Value, which buys undervalued high-quality stocks. To fit it in, were dropping Bridgeway Small Cap Value – a fund we like but that tends to have wilder swings.
Whichever funds you choose, be patient. Whether the recovery takes another five months or five years, you can be sure that the low fees, consistent strategies and trustworthy management of the MONEY 70 funds will keep working in your favor.
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