Why Your Mutual Fund Stinks
By Graham Summers
All around us, other countries' stock markets are making investors rich.
From October 2002 through March 2006, the U.S. stock market returned roughly 59%. That's a fantastic return, equal to average annual gains of 14%. The U.S. must have blown away its global competition, right?
Wrong. Out of 25 world indexes, the U.S. came in 23rd.
Not once in the last 27 years has the U.S. market produced the highest returns of any global market. Of course, some booming markets are volatile, corrupt wastelands, void of any serious accounting... Consider China: The Shanghai Composite Index is up 225%, but companies are not required to disclose their debt.
Still, the biggest opportunities for investors right now lie outside of the U.S. And by playing it safe and focusing on countries with sound accounting principles, you can make an absolute fortune.
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For the passive investor, a good way to start is to find an internationally focused mutual fund that's managed by an exceptional investor, one that's been around for a long time... A mutual fund like the Oppenheimer Global Opportunities Fund.
Global Opportunities is a "go anywhere" fund, meaning it can invest in any country, in any asset class. Now when you consider any mutual fund, you need to look for three qualities:
| 1. |
Low fees |
| 2. |
A manager that's been around for at least 10 years |
| 3. |
Large personal holdings on the part of management |
Global Opportunities has A shares, B shares, C shares, N shares, and Y shares. The C shares (OGICX) are the most attractive from a fee standpoint: They have no load fees. And operating fees are only 1.8%.
The A and B shares both feature fees of 5% either up front or if you sell your holdings anytime in the first six years.
It's important to find a manager who's been involved in international investing for at least 10 years. Emerging markets have soared in the last five years. You could have picked virtually any market and made a killing.
Global Opportunities is managed by Frank Jennings. Jennings has been managing money since 1960. The man is no slouch. Since its inception (December 1993), OGICX has returned average annual gains of 13.8%. At this rate, your money doubles every six years.
As of September 30, mutual-fund tracking service Lipper ranks Global Opportunities second out of 17 global "flexible portfolio" funds.
And Jennings puts his own money alongside his investors' – nearly $1 million worth.
The fund's top five holdings are:
Company |
Industry |
% of Holdings |
Advanced Micro Devices |
semiconductors |
7.7 |
Bombardier |
aerospace |
3.4 |
Cree |
semiconductor equip |
3.3 |
NicOx SA |
biotechnology |
3.2 |
ABB |
electrical equip |
2.7 |
|
Jennings has about 50% of the fund in U.S. companies that benefit from global growth, with a good chunk of it in the technology sector (he owns eBay, Rambus, and JDS Uniphase). He also has large weightings in drug companies, electrical infrastructure, and aerospace.
If you're bullish on these sectors, this may be the fund for you.
Good trading,
Graham
