Kiplinger created a hall of shame for mutual funds and you should definitely check it out to be sure you don't own one of these duds. You also want to be sure you don't buy any of them in the future. While some fund directors may get the hint and even find a good manager, the fact that they've got such poor records for so long means you couldn't even trust a turnaround attempt. The directors of these mutual fund groups are dropping the ball when it comes to oversight.
One pure disaster that Kiplinger highlights is the Franklin Real Estate Securities fund. This fund has been in the bottom 20% for one, three, five and ten years. To give you an idea of how out of touch with reality its board members are, the directors wrote in its annual report, "the Board found such performance to be acceptable." If that level of performance is acceptable to Franklin's board, I'd question their stewardship of all their funds.
Another one to dump if you already haven't is the Van Wagoner Emerging Growth fund. It did have an impressive gain of 291% in 1999, but after that it lost it's way. While many emerging growth funds have been average 40% gains in recent years, this fund has an annualized loss of 9%. Garrett Van Wagoner settled fraud charges in 2004 with the SEC. Luckily investors have been smarter than Van Wagoner and got out. The fund shrank in assets from it's high of $1.5 billion to just $27 million. At least I hope most of that loss were investors running for the doors and not just a drop in asset value. Two of my favorite mutual funds in this category are T. Rowe Price Emerging Markets Stock (five-year annualized return of 38.68%) and Vanguard Emerging Markets Stock (five-year annualized return 37.45%).
I just took a brief look at two of the losers. Be sure to check out the rest at Kiplinger's Hall of Shame. If you do hold any of them don't wait for a turnaround, sell and move on to better funds in the same category. I know you can find them.
Lita Epstein has written more than 20 books including the "Pocket Idiot's Guide to Investing in Mutual funds." In the interest of fair disclosure, I do own both T. Rowe Price Emerging Markets fund and Vanguard Emerging Markets Stock fund.
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