What's New

Janus Fund Manager To Step Down

Like Funds, Newsletters That Sink Can Swim

10/18/07 - Bernie Schaeffer, Financial Newsletter, Investing Advice

september 2007 performance review

10/16/07 - Powerfund Portfolios Performance Review

The Dow climbed 4.16%, and the S&P 500 was up 3.72% in September. Both indexes beat smaller caps, which rose a relatively paltry 2.91% (Russell 2000) in comparison. Tech stocks were particularly strong, with the Nasdaq jumping 4.14%. Larger cap tech represented the best of both worlds, as the Nasdaq 100 index climbed 5.14% for the month.

Fidelity's New Funds Give You Your Money Back

10/15/07 - New Fund Launches, Vanguard

Seven Habits of Highly Defective Funds

10/10/07 - Watch Out

Yesterday we noted a high yield bond fund that has seen its fund price (NAV) fall about 40% since early June. Higher risk bond funds follow a pattern of feast and famine – the key to investing in such funds is to identify the types of bond funds that can tank 40%, and either avoid them completely or consider a speculative investment near the bottom of a famine cycle.

The trouble is that these bond funds tend to look the best at exactly the wrong time. They have the best reviews and ratings, and the performance figures smash the competition.

But remember, for most types of bond funds, performance comes largely from just two things: the fund’s expense ratio and the quality of bonds the funds hold. A much smaller part of the performance can be attributed clever bond selecting.

Here then, dear reader, is the MAXfunds “Seven Habits of Highly Defective Bond Funds”, our step by step instructions for lousy managers to destroy their perfectly good bond fund...

Funds Keep Singin’ The Subprime Blues

10/09/07 - Junk Bonds, Subprime Woes

Every few years there is a mini bond crisis. Each time the same thing happens: bond funds that looked great by beating their peers, fall precipitously. Same goes for 2007.

The [Regions Morgan Keegan Select High Income Fund (MKHIX)] is down about 35% this year, and is at the bottom of the junk-bond fund category for the one-, three- and five-year annual performance periods, illustrating how recent events are starting to tarnish even manager Jim Kelsoe's impressive long-term record."

Lord knows how much investors would have lost in these high flying RMK bond funds if the giant financial firm behind the funds didn’t step in (RMK funds are owned by Regions Financial RF):

The annual report that covers these funds also outlines some important steps taken by the funds' adviser and affiliates to help cope with recent losses. These include stepping in to buy about $55.2 million in shares of the High Income Fund and $30 million in the Intermediate Bond Fund [MKIBX] from the beginning of July to the end of August to help provide liquidity."

The takeaway is that you shouldn't mix mutual funds with thinly-traded higher-risk investments, or you could end up singing the subprime blues:

I went to the bond market, fell down on my knees
I went to the bond market, fell down on my knees
Asked the Lord above, have mercy now, save my poor bonds if you please

Standin' at the bond market, tried to flag a buy
Whee-hee, I tried to flag a buy
Didn't nobody seem to know me, everybody pass me by

Standin' at the bond market, risin' sun goin' down
Standin' at the bond market baby, the risin' sun goin' down
I believe to my soul now, my po' bonds is sinkin' down

You can run, you can run, tell my friend Bennie B
You can run, you can run, tell my friend Bennie B
That I got the bond market blues this mornin', Lord, baby my bonds are sinkin' down

(To the music of Crossroads Blues / Robert Johnson 1936)

LINK

Ask MAX: A Fund with an 18% Yield?

10/06/07 - Ask MAX, Ask MAX, Investing Newsletters, Korea Fund

Mike asks:

I recently received an email solicitation for the 'High Yield Investing Newsletter,' featuring a mysterious diversified fund called The Korea Fund (KF) which sports a whopping 18.4% dividend with a 34 .4% projected yield! Is this even possible?"

It is, in fact, possible for a diversified fund to yield 18.4%. But of course, there is a catch. This kind of yield is best avoided. The income newsletter's marketing department has clearly opted to transform lemons into lemonade. So let’s get to the bottom of this allegedly attractive investment opportunity.

There really is no such thing as a free lunch when it comes to investing. When stocks pay dividends that beat the S&P 500 (which is currently yielding under 2%) by such a large margin, there is always a reason...

Vanguard’s 7% Forever Funds

10/03/07 - New Fund Launches, Vanguard

Vanguard recently announced plans to launch three new managed payout funds. Managed payout, managed distribution, or level-rate dividend policies mean the mutual fund company decides how much the fund’s distributions will be, or manage the portfolio specifically to create a certain distribution payment stream. With most mutual funds irregular capital gains and dividend distributions are the result of income and realized capital gains building up in the fund portfolio. According to Vanguard, their highest payout fund is:

…geared toward investors who seek a higher payout level to satisfy current spending needs while preserving their capital over the long term. This fund is expected to sustain a managed distribution policy with a 7% annual distribution rate…"

This move by Vanguard brings a little legitimacy to a sometimes questionable strategy used primarily by closed end funds to give investors the illusion of steady yield.

As investors retire, they want regular returns so they can live off their portfolio. Stocks offer growth to beat inflation, but little in the way of regular income – even a fund made up of the highest yielding common stocks in the market delivers under 4% today. Bonds offer slightly more yield, but no principal growth to offset 30 retirement years of inflation.

Vanguard’s new funds will attempt to address this problem. They will be formulated with the right asset mix to allow monthly liquidation at a rate as high as 7% a year with minimal principal downside...

Our Favorite Funds

10/02/07 - 'Best Funds' lists, Our Favorite Funds

Which stock funds are best? Which fund categories are most attractive? The MAXfunds Our Favorite Funds Report answers these and other key questions facing fund investors. Fortunately for you, dear fund investor, Our Favorite Funds is now available for FREE. And unlike most things, you get more than you pay for.

With thousands of mutual funds and dozens of fund categories to choose from, selecting the right funds is tough enough, but building a well balanced portfolio is becoming more difficult by the day. Our Favorite Funds is our handpicked list of the best mutual funds in each fund category, along with our analysis of each fund category as a whole.

Discover the complete list of MAX's Favorite Funds by clicking here.

Buddy, Can You Spare a 10 Cent Euro Coin?

10/01/07 - Powerfund Portfolios Feature Article

Since late 2002, investments have gone up, up and away. Stocks, oil, metals, real estate, art, collectibles, classic cars – you name it. Every investment carries a higher price tag than it did then. In the last five years, it's been difficult to lose money. Everything has gone up. Or has it?