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February, 2010


If you are like me and the majority of investors, you may be kind of dazed by all the volatility in equities over the past several years. First there was the tech bubble, then it burst, next the housing bubble, and then it collapsed. Along the way, many folks felt euphoric as stocks rode up a couple huge waves of "irrational exuberance," only to fall into troughs that for awhile threatened, it seemed, to be bottomless. Indeed, in the depths of this last recession and bear market, experts were afraid there could be a global economic deterioration worse than the Great Depression. I have afterward heard a number of interviews of knowledgeable men and women convinced we escaped that fate by the skin of our teeth.

Those who have come out of this period still possessing their shirts have reason to be grateful. A goodly percentage simply lost theirs. Even the stodgy S&P 500 Index has been down for the preceding decade.* The S&P 500 Index fell 24.10% during what is now being called "the lost decade," from the close of trading 12/31/99 through 12/31/09, an average annual loss of 2.72%.

Yet during this tumultuous span a few well led equity mutual funds have racked up annual records of about 12% (or more) above that standard's performance. We can be sure that past performance does not guarantee future returns, but some of these standout funds may warrant a serious look as investors lick their wounds and prepare to carry on toward eventual retirement and other long-term goals. Though it is far from certain, my own bet is that mutual funds such as these, that do not have excessive risk for their rewards and have been this well managed for a decade or more of often nosebleed highs and stomach churning lows, have a good chance of beating the major market indices over the next ten years as well.

Mutual FundSymbolRecent
Toll Free No.
Cohen & Steers Realty SharesCSRSX$44.3211.2%800-437-9912
Fairholme FundFAIRX$30.8413.2%866-202-2263
Fidelity Low-Pirced StockFLPSX$31.6911.0%800-544-9797
First Eagle GlobalFESGX$38.5312.0%800-334-2143
Oakmark Global IOAKGX$18.7511.7%800-625-6275
Matthews Pacific TigerMAPTX$18.1811.5%800-789-2742
T. Rowe Price Latin AmericaPRLAX$44.3118.4%800-638-5660
Vanguard Health CareVGHCX$118.799.2%800-662-7447
Vanguard REIT Index - Inv.VGSIX$13.9310.4%800-662-7447
Yacktman FundYACKX$14.9611.9%800-525-8258
(*through 2009)

So I have selected my favorites from among the outstanding performers and present them in the table above. If high risk keeps one up at nights, I think the following are likely to turn out to have the lowest volatility: Fairholme Fund; Fidelity Low-Priced Stock Fund; Vanguard Health Care Fund; Vanguard REIT Index Fund; and Yacktman Fund. One could, I think, do a lot worse than to buy an equal dollar value of shares in all ten funds, but those five may have a better shareholder "sleep-to-performance ratio."

Even somewhat lower risk mutual funds can go down substantially, however, during stock market debacles like occurred in 2008 through early March, 2009. And we keep hearing of all sorts of things that might alarm investors, from cyber terrorism to war in the Middle East, a double-dip recession, the end of the 5000-year Mayan calendar, etc. Therefore, I recommend that one acquire shares in the chosen mutual funds gradually, thus gaining more in the inevitable dips and a better average per share price.


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

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