Oct. 16, 2002 — Despite further damage from this year’s bear market, the giant funds are still ahead of the pack over the long term.
Based on annualized returns, each of the ten largest funds outpaced its respective peer group for the three- and ten-year periods through September. While the heavyweight funds’ recent losses have been steep, their longer-term gains support the fund industry’s frequent recommendation that investment goals are best achieved through buy-and-hold strategies.
As with most funds, the ten largest funds have suffered this year from fears about earnings, corporate governance, valuations, and terrorism. Because they tend to focus on large-cap stocks, which have been hit particularly hard this year, the heavyweight funds are generally moving toward a third year of sharp losses.
The relative performance of the ten largest funds this year also reflects the overall trend of balanced and large-cap value funds holding up better than growth portfolios. The less volatile balanced and value offerings understandably showed better relative results in a choppy and punishing investment climate.
The two balanced offerings among the heavyweights — Vanguard Wellington/Inv (VWELX) and Income Fund of America/A (AMECX) — are the only giant funds with gains for the three-year period through September. This favorable showing partly stems from bonds’ better relative results since the demise of the 1990s bull market.
While the giant funds’ two value offerings — Investment Company of America Fund/A (AIVSX) and Washington Mutual Investors Fund/A (AWSHX) — held up best among the group’s equity offerings for the three years through September, the two funds also did better than four of the ten giant funds for the ten-year period through September. This also mirrors the greater fund world, where large-cap value offerings have outpaced large-cap growth offerings for the ten-year period through September.
Though the current market slump may not be over, value funds are on track for better results over most of the latest boom/bust market cycle.
Ten Largest Funds:
Inv Style3rd Qrtr 2002 Ret(%)2002 Ret to 9/30/02 (%)3-Yr Ann Ret to 9/30/02 (%)10-Year Ann Ret to 9/30/02 (%)
Fidelity Magellan (FMAGX) Large-Cap Growth-16.4%-29.0%-12.9%+8.9%
Vanguard 500 Index/Inv (VFINX) Large-Cap Blend-17.2%-28.2%-12.9%+8.9%
Investment Company of America Fund/A (AIVSX) Large-Cap Value-14.5%-20.7%-4.5%+10.1%
Washington Mutual Investors Fund/A (AWSHX) Large-Cap Value-17.9%-21.2%-3.9%+11.4%
Growth Fund of America/A (AGTHX) Large-Cap Growth-13.6%-27.1%-4.9%+12.1%
Fidelity Contrafund (FCNTX) Large-Cap Growth-9.9%-10.7%-5.1%+12.4%
Fidelity Growth & Income (FGRIX) Large-Cap Blend-14.0%-22.4%-8.6%+10.4%
Vanguard Wellington/Inv (VWELX) Balanced-11.0%-12.3%+1.1%+9.9%
Income Fund of America/A (AMECX) Balanced-10.3%-10.7%+1.5%+8.9%
American Century Ultra/Adv (TWUAX) Large-Cap Growth-15.4%-25.9%-12.5%+10.1%
Fund Inv Style3rd Qrtr 2002 Ret (%)2002 Ret to Sept (%)3-Yr Ann Ret to 9/30/02 (%)10-Yr Ann Ret to 9/30/02 (%)
Large-Cap Growth Average-16.2%-31.4%-16.4%+6.7%
Large-Cap Value Average-18.3%-25.8%-6.9%+8.4%
Large-Cap Blend Average-16.8%-27.7%-12.3%+7.8%
Balanced Funds Average-9.7%-15.5%-3.4%+7.4%
Domestic Equity Funds Average*-16.3%-25.3%-7.5%+7.9%
*Excluding sector and balanced funds.
Source: Standard & Poor’s. Total returns are in U.S. dollars and include reinvested dividends.