Investing January 3, 2005

2004 Brings Good Returns in Stock Mutual Funds

January 3, 2005 (PLANSPONSOR.com) - Despite market prognostications for a mild year, the average equity mutual fund rose over 13% in 2004, lifted by small-cap value, real estate, and international funds.
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According to Lipper Inc., a Reuters-owned mutual fund watcher, small-cap value funds led all US diversified mutual funds, posting 20.9% average returns for the year. Small-cap core funds were close behind at 18.49%, according to Reuters. The Russell 2000 rose 17.18% on the year.

In contrast, large-cap growth funds had the lowest returns by style on the year, posting 7.4% gains since January 1. These funds still outperformed – the Dow Jones – which posted a 3.31% gain on the year.

Specialized funds also performed well in 2004, with real estate funds bringing in 32.03% on the year, making them the top performer. Natural resource funds followed closely however, posting average returns of 29.8%. Tech stocks were the year’s worst performers, posting significantly smaller gains of 4.01%.

By geography, international funds performed the best in 2004 on the back of the weaker US dollar, posting average gains of 17.66%. Latin American funds were the biggest returners in 2004 at 38.19%. European funds performed well in 2004, posting 22.07% gains. International gold funds were the only mutual funds to see negative returns on the year, losing 8.81%.

By individual funds, iShares’ MSCI Austria Index Fund outperformed all others in 2004, posting gains of 71.38%. ProFunds’ Wireless Communication UltraSector fund was the second-best performer on the year, posting returns of 67.59%. The Ameritor Investment Fund had the worst gains on the year, losing 35.29%, while ProFunds Semiconductor UltraSector lost nearly as much, falling 35.23%.

Looking at the markets in the past five years, small-cap and value funds performed the best. Of large-cap styles, only value funds posted positive returns, with 3.5% average yearlry gains. On the other end of the spectrum, small-cap value rose 16.53% annually. By sector, real estate – buoyed by low interest rates – performed the best over the past five year, rising 21.57% per year on average. Tech performed the worst, losing of 16.36% annually on average.

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