For U.S. investors, 2005 has been uninspiring. The most popular domestic stock funds are posting gains of about 3 to 5 percent, and bond...
For U.S. investors, 2005 has been uninspiring. The most popular domestic stock funds are posting gains of about 3 to 5 percent, and bond funds are earning even less.
That beats the losses of the 2000-02 bear market, but it’s a far cry from the 1990s — when double-digit annual returns were almost a given.
For professional financial advisers the climate of low returns on bread-and-butter U.S. funds poses the challenge of how to meet clients’ goals without taking undue risk.
Joel Framson, a financial planner at Silver Oak Wealth Advisors in West Los Angeles, said his clients’ portfolios had more of an international flavor and more commodity-focused funds these days.
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“Ten years ago I was much more comfortable using traditional stock-index funds and asset-allocation models, but the market and the investment environment have changed, especially since 2000,” Framson said.
Financial planner Cynthia Conger in Little Rock, Ark. said bond portfolios that historically had generated 6 to 7 percent returns were now producing 4 to 5 percent.
For their part, investors say strategies such as classic portfolio diversification have kept them from fretting too much about the fortunes of the stock market.
What investors are buying
Here are the mutual fund categories that have attracted the largest net cash inflows this year. The list is dominated by
relatively conservative funds (portfolios that mix stocks and bonds) and by foreign stock funds, with fund category at left and
2005 net cash inflow (through August, in billions) at right:
Moderate allocation (stock and bond mix): $34.9
Intermediate-term bond: $23.3
World allocation (stock and bond mix): $19.3
Foreign large-cap blend (growth and value stock mix): $19
Mid-cap value stock: $14.8
Conservative allocation (stock and bond mix): $14.2
Foreign large-cap value stock: $11.6
Natural resources: $11.3
World stock: $11.2
Foreign large-cap growth stock: $8.8
Source: Financial Research Corp.
“If your investments are spread out among different types, whenever the stock market is down something else is probably doing OK,” said Ken Molina, 46, a real-estate agent in Los Angeles, whose portfolio includes investment properties, stock funds, annuities and cash.