Archive for the tag 'Crash'

Top Mutual Funds Since 1987

Kurt Brouwer November 6th, 2007

Richard Widows at theStreet.com wrote an excellent piece on the mutual funds leaders and laggards over the 20 years since the Crash of 1987. In it, he echoed a theme we discussed in The Stock Market Crash of 1987, namely that the 22% downturn that day was just a footnote in the annals of stock market history. Widows writes:

‘ Oct. 19, 1987, Black Monday produced the largest one-day percentage decline in stock market history. But for many buy-and-hold mutual fund investors, it proved to be little more than a relatively brief, albeit painful, bump along a path of long-term, annualized double-digit returns…’

Even though the Crash is but a footnote in the annals of stock market history today, back then it was a traumatic event. So, Richard Widows set out to find the funds that investors would have looked at back then. The theme of the piece is setting out which mutual funds have been leaders or laggards since the Crash (actually since September 30, 1987, which was just before the big drop on October 19, 1987). Here are the top five leaders and laggards from his list. He goes into more detail on them and other mutual funds in the piece:

LEADERS (since 9-30-87)

  1. Vanguard Health Care (VGHCX)
  2. Federated Kaufman (KAUAX)
  3. Vanguard Energy (VGENX)
  4. FPA Capital (FPPTX)
  5. Fidelity Select Software (FSCSX)

LAGGARDS (since 9-30-87)

  1. Vanguard Small Cap Index (NAESX)
  2. Progressive Capital Accumulation (PCATX)
  3. Midas Special Fund (MISEX)
  4. Midas Fund (MIDSX)
  5. GAMCO Mathers (MATRX)

Widows also points out some interesting facts about the mutual funds that made the list, either as leaders or laggards [emphasis added]:

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The Stock Market Crash of 1987

Kurt Brouwer October 19th, 2007

It has been 20 years since that memorable day when the Dow Jones Industrial Average fell over 22%. The fact that the drop was only 508 points should put things in perspective for us in the sense that a comparable drop would have to be over 3,000 points.

1987 was also a memorable year for our firm because we opened our doors in August, 1987. At that point, we did not have many clients, our track record was nonexistent and few people could spell or pronounce our firm’s name correctly, so we figured we had an opportunity to do something new and different. Our firm, Brouwer & Janachowski Incorporated, pioneered what was then a new type of investment or financial advice. We developed portfolios of no-load mutual funds for our clients instead of the more traditional portfolio of stocks and bonds. We still invest this way today — 20 years later.

That year I was in the middle of writing our first investment book, Mutual Funds: How to Invest With the Pros (Wiley). Since 1987, many things have changed, but our beliefs and values as financial advisers have remained remarkably constant. Here’s what I wrote about investing way back then:

‘…Planning your next investment move these days can be like driving in the fog. Even if you manage to get home, your nerves are shot. Was it worth the aggravation? Or you may feel you’ve been left behind-stuck in the slow lane as a red Ferrari screams by at 80. The stock market has taken off, but your stocks haven’t. Or you hear about takeovers and leveraged buyouts where savvy investors made a killing-but when you finally act, it’s on a stale ‘hot’ tip and your fingers get singed.

Before you spend time learning how to invest, first decide if you should be investing at all. Before you put money in mutual funds or other investments, think hard about your finances. Do you have good health and life insurance? Have you salted away several months’ living expenses in a money market fund or a bank account? Have you contributed to your individual retirement plan (IRA) or your company’s retirement plan? Make sure you have taken care of these personal investments before you look further.

BROUWER’S BASICS FOR BULLETPROOF INVESTING

Pros invest using simple, common-sense rules. They’re human, too, so they need a disciplined work and decision-making environment. Sounds complicated, right? Don’t believe it. Just follow these four steps

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