MUTUAL FUNDS. The steady returns of old funds...
DOES what goes up have to come down? Not always, boast an exclusive group of eight mutual funds. The managers of all these funds have consistently beaten the market in every ten-year period for the last 30 years. They are eight of the 85 oldest existing common stock funds in the United States, and although often overshadowed each quarter by newer funds that quickly rise to the top, they demonstrate a long-term consistency and reliability that makes them ``a lot more rewarding,'' says Graham Holloway, president of American Funds distributors, which markets three of the eight funds.Skip to next paragraph
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The eight common stock funds that outperformed the market for 30 years, based on 1986 figures by Lipper Analytical Services and Wiesenberger Investment Services, are: American Mutual Fund, up 477.52 percent for the latest 10-year period; The Investment Company of America, up 469.27 percent; and Washington Mutual Investors Fund, up 460.98 percent. These three are all part of the American Funds Group.
The other five are: Fidelity Fund, up 414.90 percent; Guardian Mutual Fund, a 462.66 percent gain; Over-the-Counter Securities Fund, up 670.62 percent; Pioneer Fund, up 346.16 percent; and Templeton Growth Fund, up 514.96 percent.
(A ten-year performance record covers a variety of market conditions and eliminates special short-run circumstances favoring particular types of investments.)
What has allowed these funds to so consistently make money for their shareholders when the market is rising, and then protect that money when it declines?
``I suspect the key to their success is simply stable management, a steady income that's easily invested, and growth that's not incredible,'' says Art McPherson, of Colonial Management Associates in Boston.
Others agree that long-term success usually follows from a fairly conservative approach. Meanwhile, in the short-term and even for a period of several years, these funds could have been out of phase with the market, says John Carey, who manages the Pioneer Fund.
With this kind of conservative management, ``what you see is what you get,'' observes Donald Rugg, president of Charlesworth & Rugg, a money management services firm in Woodland Hills, California. You know exactly what you're getting into, and what to expect, he says.
Being around so long has made these funds reassuring to investors, who won't be swayed by one boom year, thus avoiding the ``trap of cumulative performance,'' says Michael D. Hirsch, vice president of the Republic National Bank of New York.
Because the environment has become so competetive, says Gerald Perritt, editor of The Mutual Fund Letter in Chicago, ``fellows coming out with a single fund probably don't stand a chance of sticking in the long-run.'' Most of the funds that do succeed are part of a bigger family, he says.
Each of the eight ``winners'' concentrates in stocks of solid high-quality companies, maintains a diverse portfolio of equities, and has been under the same management for many years. They also conduct almost all of their own research.
The unique way in which each is run, however, makes it hard to find a single, successful investment pattern.
Pioneer's manager John Carey says his fund places a great deal of emphasis on meeting the management of a company before investing in it. He looks for management that displays continuity and a vested interest in the company's success - such as owning a meaningful amount of stock in the company.