The High and Mighty in a Bear Market

By Lawrence Czelusta (from the October 2002 issue of Index Rx)

So how did the big boys do in 2002? Let's look at the performance of the darlings of worldwide investing, those actively managed funds whose past performance (or is it marketing expertise by the fund offering company?) has caused such a rush to buy and hold these super-stellar, beyond-our-galaxy stars that shine with the brilliance of many billions.

Following are the top actively managed load and no load mutual funds listed by asset size, excluding those containing bonds, as listed by the Associated Press and Lipper Inc. The total assets of these funds exceeds 280 billion dollars. We are likely talking here about the funds your friends, family and neighbors owned in 2002 (although they may not admit it when asked).

Ladies and gentlemen, this was the reality of the average American investor in 2002. Only two of these highly touted managed funds performed better than our worst performer, Max Dose Rx (before loads and expenses, that is; after accounting for these, none of them did). And not one of them outdid High Dose Rx or ETF Rx. The average performance of these well known funds was -16.55% in 2002. The average of our three portfolios for 2002 was -8.5%.

We are not proud of our performance in 2002. Any loss stinks, but we smell not nearly as odious as Fidelity Magellan.

Does our reaction against mutual fund companies seem too bitter and harsh? If so, I sincerely apologize for offending anyone's sensibility, and also for the losing year that we have suffered through together. I would wager, however, that investors waiting for an apology from Fidelity Magellan's fund manager will be waiting much longer than the Israelites waited for the end of their captivity.