2012 Mutual Fund Rankings

Day 29, 2011, June 29th (Photo credit: jmtosses)

It was a mediocre year for the U.S. stock market and U.S.–oriented stock funds. But it could have been worse. In fact, it was a lot worse—overseas. With concerns growing about the health of the global economy, investors concluded that the U.S. was the best block in a bad neighborhood and nudged Standard & Poor’s 500-stock index to a 5.5% total return over the 12-month period that ended June 29 (that figure reflects a 9.5% gain in the first six months of 2012). But as the European debt crisis and the possible breakup of the euro zone took center stage, and as growth slowed in China and other emerging nations, investors abandoned foreign stocks in droves. The MSCI EAFE index, which tracks perform­ance in developed overseas markets, plunged 13.4%, and the MSCI Emerging Markets index sank 15.7%. The past year also marked the growing prominence of what has become known as the risk-on/risk-off trade—that is, the tendency of all sorts of markets to move in lock step depending on the mood of investors on a given day. The phenomenon made it excruciatingly difficult for traditional stock pickers to excel. Over the past year, for example, only 11% of actively managed stock funds that focus on large U.S. companies beat the S&P 500.

The stock-fund groups that performed best over the past year underscored two themes: the desire for safety and stability, and the quest for income (see Great Funds for Growing Dividends). With the U.S. economy in a rut, a number of European countries in recession and rock-bottom interest rates that show no signs of rising soon, look for these trends to continue over the coming year. ... Continue to read.

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