Investing April 24, 2001

Fund Lemons Leave Bitter Taste

April 24, 2001 (PLANSPONSOR.com) - Investors should jettison underperforming funds in order to raise cash for better investing days ahead -- even if those funds come from the industry's biggest-name fund families.
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That recommendation is the latest from an investment newsletter editor as he released his list of first quarter 2000 “lemons.” The list, which featured 319 funds with assets of $189 billion, included offerings from Fidelity, Vanguard, and Putnam.

To appear on Maverick Advisor?s Lemon List a fund must underperform its peer group average by 25% the first year and underperform for three and five years as well. “In this first quarter, we’ve found that well-known fund families, the ones that are supposed to be more stable in downside markets, are showing up as blatant underachievers,” according to Doug Fabian, Maverick president.

“Big funds such as Putnam New Opportunity, Fidelity Adviser Growth Opportunity, and Fidelity OTC, are huge disappointments when you compare them with their peers. Investors should squeeze the lemons out of their accounts and choose funds that perform better than their peer group averages, not worse.”

A surprise lemon this quarter is Invesco Blue Chip Growth , a popular fund for long-term investors, performing at a dismal -57.78% for the past year, -7.52% for the past three years, and its five-year average was 5.53%.

Fabian?s 10 worst offenders, based on asset size are:

  • Putnam New Oppty
  • Fidelity Adv Gr Opp
  • Fidelity OTC
  • Putnam Global Growth
  • Alliance Growth
  • Fidelity Destiny
  • Pioneer II
  • Putnam OTC Emerg Gro
  • Vanguard LS Mod Growth
  • Prudential Equity

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