About.com Mutual Funds

The End of a Decade

Sat, 21 Nov 2009 17:27:38 +0000

It seems like yesterday that Y2K was making the headlines. Now the roaring 2000s�(that one is for Harry Dent)�are coming to a close.

We will soon start seeing a deluge of "mutual funds of the decade" accolades and "portfolio managers of the decade" awards.� Morningstar is already out with "The Fund Manager of the Decade Finalists."

Does it mean you should buy these top funds of the last decade? Well, I'm not sure what Morningstar is telling you, but the research indicates that investors shouldn't buy last year's, or last decade's, top performing funds.

The End of a Decade originally appeared on About.com Mutual Funds on Saturday, November 21st, 2009 at 17:27:38.

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2009 Cap Gain Distributions

Sat, 21 Nov 2009 15:07:17 +0000

Mutual fund investors know that if�they make money,�they pay taxes. Unfortunately, mutual fund investors are also faced with a potential tax liability whether they make money or not.

In my latest article�about cap gains distributions, I have posted a few helpful links about these "phantom gains" that are known as capital gains distributions. I have also linked to select mutual fund companies that have listed expected capital gains distribution estimates.

Fortunately, 2009 won't be a very taxing year for many mutual fund investors (in terms of distributions, that is).

2009 Cap Gain Distributions originally appeared on About.com Mutual Funds on Saturday, November 21st, 2009 at 15:07:17.

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Is an ETF Better Than a Mutual Fund?

Fri, 13 Nov 2009 21:35:42 +0000

You asked for it. You got it. The ETF vs. mutual funds debate from all angles. Only this time you get the facts from the ETF Guide and the Mutual Fund Guide (that's me).

I couldn't say it better myself, so here's what the ETF Guide writes on his blog, "Mark Kennedy meet Lee McGowan. ETF Guide meet Mutual Fund Guide. Lee and I collaborated on our latest article comparing ETFs to mutual funds. The new piece gives you the story from both sides. Is an ETF better than a mutual fund or is a mutual fund better than an ETF? We both have�our opinions, as you will see."

Mark goes on to say, "But wait, there's more! We also give you the inside scope on the tax implications of each product, the benefits, the risks, the whole enchilada. So without further ado..."

Is An ETF Better Than a Mutual Fund?

Is an ETF Better Than a Mutual Fund? originally appeared on About.com Mutual Funds on Friday, November 13th, 2009 at 21:35:42.

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Reader to Me: ��you don�t know anything!�

Sun, 08 Nov 2009 18:09:59 +0000

Just like any writer, I receive both positive and negative emails and comments from readers. You should see the latest zinger.� I have to admit, I wish the statement would have included some evidence backing up his comments. Rather than deleting what�he wrote, I've decided to share it.

A couple of lines from Guest Dan's comments include telling me that I "don't know anything" and that I should let "someone write an article that doesn't like mutual funds." You can read Guest Dan's entire statement (and a few other readers' statements) in "Readers Respond."

While I would like to find Dan and ask him what he means by "tell the truth" and ask him�why I would want a biased person to write an article, I think the more productive question would be to ask him to comment on my original question that he didn't answer: "As with any investment structure, mutual funds have their advantages and disadvantages. What do you think are the most disadvantageous features of mutual funds?"

So why am I bothering highlighting this comment when, until now, I didn't highlight the fact that my blog was named a "Top Investment Blog" by an ETF blogger (yes, an ETF blogger of all people)? Well, I, selfishly, want to highlight a blog post�that might have helped Guest Dan understand my views on mutual funds and ETFs.

Reader to Me: ��you don�t know anything!� originally appeared on About.com Mutual Funds on Sunday, November 8th, 2009 at 18:09:59.

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Vanguard says, �There�s an app for that��

Sun, 08 Nov 2009 16:28:03 +0000

Vanguard is cutting edge. They have a Facebook page, a blog, e-newsletters and now, an iPhone/iPod Touch application. So, if you have an account with Vanguard and you're compelled to view your account online and on the go: "There's an app for that."

Tell us if you are interested in viewing your investment accounts on your phone:

Vanguard says, �There�s an app for that�� originally appeared on About.com Mutual Funds on Sunday, November 8th, 2009 at 16:28:03.

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ETFs: Look Beyond the Hype

Sat, 07 Nov 2009 15:42:35 +0000

If you understand the ETF structure, then you know when an ETF resembles a closed-end fund. If you own the more exotic or specialty ETFs or if you are considering owning one of these ETFs (ETFs that do not hold traditional individual securities such as stocks), then do yourself a favor and understand the potential pitfalls of the ETF structure -- �such as when an ETF resembles a closed-end fund.

Why? Well, let's look at an example of an ETF that behaves like a closed-end fund. �Recently, the Powershares DB US Dollar Bullish (UUP) stopped issuing new shares (as of November 5^th).� UUP even stopped trading for a period during the day on November 5^th.

The fact that UUP stopped issuing new shares is not, unfortunately, a new problem for ETFs. Several commodity-based ETFs have had the same issue over the past year. Why is this a problem?

The problem is that many advocates of ETFs will tell us that ETFs are priced at or close to the value of the underlying holdings of the ETF. The creation-redemption feature of the ETF, in part, allows for this benefit. �If there is a dislocation in the market that disrupts the creation-redemption feature, then you have an ETF that resembles a closed-end fund, which defeats this espoused feature of the ETF and you are not getting what you pay for which are the underlying securities (a similar issue exists with closed-end funds).

Fortunately, for UUP investors, the problems were resolved by the end of the trading day.� But what this tells the ETF product manufactures is that the kinks of the ETF structure need some work.

Want to learn more? Read the basics:

ETFs Challenging Mutual Funds?

ETFs vs. Mutual Funds: An Active vs. Passive Debate

Read the more advanced:

New Challenges for Commodity ETFs

An Emerging Problem for this ETF

ETFs: Look Beyond the Hype originally appeared on About.com Mutual Funds on Saturday, November 7th, 2009 at 15:42:35.

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Fidelity on International Investing (About Time)

Sat, 31 Oct 2009 11:56:41 +0000

Fidelity is increasing their international exposure. It must be the recent strength in the international markets and the media hoopla about the falling dollar that pushed this fund behemoth to increase their international weightings in their target-date funds to 30% from 20%. But they've done more than just increase weightings in some funds.

Fidelity has also posted a "Fidelity Viewpoints" piece on their Web site regarding international investing and diversification, has increased their equity research operation by opening research offices (in London, Hong Kong and Tokyo), and has increased their global stock coverage by 40% since 2006.

So, Fidelity, it's good to see that you are on board with global investing, but how about increasing your international investment options (and weightings) in your 529 education savings plans?

Related Articles from About.com Mutual Funds:

A Primer on the Falling Dollar

International Funds and the Falling Dollar

Fidelity on International Investing (About Time) originally appeared on About.com Mutual Funds on Saturday, October 31st, 2009 at 11:56:41.

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401(k): Good News, Bad News

Fri, 30 Oct 2009 11:26:22 +0000

Contrary to Chicken Little, 401(k) investors don't think the sky is falling. The Investment Company Institute (ICI) released data that showed Americans are still contributing to their 401(k) plans. �

There was a lot of data in the ICI study.� One particular piece of the study found that 401(k) loan activity has been flat for a decade and that hardship withdrawals and contributions are "in line with historical numbers." Popular opinion might believe otherwise; hard times might have forced savers to take loans/withdrawals from their 401(k) plans. ICI's study is just part of the story.

The ICI study shows the rosy side of the story; those that are working have remained disciplined.� On the other hand, Hewitt Associates found that 46% of employees who left their job last year took a cash distribution from their 401(k). This number, according to Hewitt Associates, surprisingly, hasn't changed since 2005.

So, according to these studies, it doesn't appear that 401(k) investors (whether employed or unemployed) have significantly changed their behavior -- whether good or bad.

How to Invest in Mutual Funds in Your 401(k)

The 401(k) Has Failed. Admit It.

401(k): Good News, Bad News originally appeared on About.com Mutual Funds on Friday, October 30th, 2009 at 11:26:22.

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Vanguard -- Index vs. Active

Fri, 23 Oct 2009 10:52:17 +0000

I have been blogging about ETFs vs. mutual funds for the last few months. I made the argument that the debate regarding ETFs and mutual funds should first be a debate regarding indexing versus active-management. This argument raised several questions.

Readers want to understand more about indexing (and passive management) and active mutual fund management. If you have the same questions, Vanguard's site has a comparison of the two styles or you can start by reading one or more pieces I have written on the topic. See the below links.

A Case for Active Management

An Emerging Problem for this ETF

Sun, 18 Oct 2009 22:44:31 +0000

There's been so much misguided, hyped information regarding ETFs, that I have enjoyed writing several pieces in the past month on several of the flaws and myths surrounding the investment structure.

This past week I read an article that's worthy of pointing out. IndexUniverse.com highlights two ETFs that track the MSCI Emerging Markets Index, but have very different returns. Vanguard's VWO and iShares EEM both track the emerging markets index, but they differ in return by four percentage points.� Why the disparity?

It turns out that VWO holds all of the stocks in the index (full replication strategy) and EEM holds only a portion of the stocks in the index (optimization strategy). This optimization strategy hasn't worked well for EEM.

Optimization strategies are also used by index mutual funds. In some cases, index funds and ETFs may hold a subset of the stocks in an index if the index�includes a number of fairly illiquid names or, simply, owns a lot of stocks.

The moral of the story is�that you need to�know what your funds own (whether it's an ETF or a mutual fund), by reading the prospectus.

An Emerging Problem for this ETF originally appeared on About.com Mutual Funds on Sunday, October 18th, 2009 at 22:44:31.

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