(PUB) Investing 2016

February 2016 Vol. 24 No. 6

FundInvestor Research and recommendatio s for the s riou fund investo

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The Corrections

more production comes on line to meet greater demand. So it is not at all surprising that this would happen to oil, copper, or coal. But the extremes of both the rally and decline are remarkable. Oil has fallen from a peak of $145 a barrel in 2008 to $30 a barrel in Jan- uary 2016 . Copper prices have fallen more than 50% from their 2008 peak, and coal is down about 70% . This has caused pockets of severe pain in the fund world, although diversified portfolios have not been hurt too badly. For example, PIMCO Commodity Real Return Strategy PCRDX has lost 21% annualized in the past three years, 14% in the past five years, and 6% in the past 10 years. Vanguard Energy VGENX has lost 10% annualized in the past three years, 6% in the past five years, and is flat for the past 10 years. The former fund has direct exposure to commodities, while the latter owns energy stocks with a bias toward the more stable oil majors. Vanguard Precious Metals and Mining VGPMX owns shares of metal pro- ducers and miners of a variety of commodities and is down a horrific 26% annualized in the past three years, 21% in the past five, and 8% in the past 10 . Of course, the biggest driver in this story is China. China’s remarkable growth over the past two decades sucked in an amazing amount of natural resources, and that inspired unprecedented investments to bring more commodity production on line. Today, China’s rate of growth is slowing much faster than expected at the same time that production of commodities has ramped up. Hence, your plummeting commodity prices. In addition, the shale oil revolution in the United States has turned the U.S. into a net exporter of oil, and Saudi Arabia’s conflict with Iran has led it to go

RusselKinnel, Director of ManagerResearch and Editor

Fund Reports

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Did you feel it? The plate tectonics of the markets shifted in January. Oil prices hit new lows, equities sold off hard, and junk bonds took a hit. Following soon after the Federal Reserve’s first interest-rate hike, we’re seeing renewed signs of economic weak- ness. Let’s take a look at what’s going on. Although many asset classes have lost value, we really have three distinct corrections in commodities emerging markets and developed-markets equities.

FMI Large Cap PIMCO Foreign Bond Royce Special Vanguard Wellesley Income

Morningstar Research

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Who Is Really Focused on the Long Term?

The Contrarian 10 Why High Quality Means Low Risk

Red Flags

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Here are some details on where we stand at the end of January 2016 :

Outflows Menace These Funds

Market Overview

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• The S & P 500 is down 5% for the year to date but up 11% annualized over the past three and five years.

Leaders & Laggards

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Manager Changes and News

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• Within the Morningstar 500 , 29 funds are down double digits for the year.

Portfolio Matters

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6 Big Mistakes to Avoid in a Retirement Portfolio

• Only 69 Morningstar 500 funds are in the black, and they are all bond funds.

Tracking Morningstar

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Analyst Ratings

• From May 17 , 2015 , 41 Morningstar 500 funds are down more than 20% , and 260 are down more than 10% .

Income Strategist

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Digging Into World-Bond Funds

Changes to the 500

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• Treasuries have shown their safe-haven appeal with a 5% gain for long maturities for the year to date.

FundInvestor 500 Spotlight

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Follow Russ on Twitter @RussKinnel

The Commodity Meltdown and Your Portfolio Economic cycles show it is quite common to see some- thing steadily rising in price, only to fall back as

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