Morningstar Advisor - October/November 2009 - 6

morningstaradvisor.com New on the Web New Blog Contributors Recent Top Articles r Roth Conversion: Good or Bad? October Sales Idea Free Download: X Games X Games was dismal, but fewer funds than Last year Two new contributors recently joined MorningstarAdvisor.com’s Markets & Economy blog: r Carl Richards, CFP, of Clearwater Asset Natalie Choate asks four IRA experts. r Change Your Life in Seven Minutes Try these micro-actions—small activities that can have a significant impact. r Three Foreign Funds That Have Sailed Fewer funds than stocks registered extreme losses Percentage of mutual funds and stocks that lost more than 75%, and more than the U.S. market, in 2008 stocks registered extreme losses. Out of 12,973 stock mutual funds in Morningstar’s database, Management, a fee-only firm that serves individuals and families that share two objectives: to not lose money and to enjoy their lives. In addition to encouraging smart financial behavior, Richards also explores how our relationship with money affects the quality of our lives at BehaviorGap.com. r Michael Zhuang is principal of MZ Capital 2009’s Stormy Seas Skillfully These foreign large-cap funds have real merit, but they’re certainly not tame. r Five of the Hottest-Selling Funds: Buy or Bail? A closer look at the most popular mutual funds. r Social Security Once Again Takes a Most investment vehicles collapsed in 2008 Last year was a dismal year for most financial markets all over the world. In the United States, only fixed-income investments offered some refuge from the all-encompassing doom. A wipeout like this can understandably lead investors to lose faith in equities altogether. Central Role in Retirement Planning Management, a fee-only registered investment advisor in Washington, D.C. Zhuang serves as a personal CFO for select businessmen and professionals, so that they have the freedom (in time and money) to do what they most enjoy. He also blogs at The Investment Fiduciary. The only issue remaining is the amount. r IRA Withdrawals for Qualified A major shock to investors was the impression that diversification failed. Because most stocks fell violently, being diversified among a number of stocks did little to prevent injury. Higher-Education Expenses 07.09 How do UTMA accounts stand up versus 529 plans? Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. The data assumes reinvestment of all income and does not account for taxes or transaction costs. Keep in mind that an investment cannot be made directly in an index, and that diversification does not eliminate the risk of experiencing investment losses. Returns and principal invested in stocks are not guaranteed. The investment return and principal value of mutual funds will fluctuate and shares, when sold, may be worth more or less than their original cost. Investors should read the prospectus and consider this information carefully before investing or sending money. Holding a portfolio of securities for the long term does not ensure a profitable outcome and investing in securities always involves risk of loss. Mutual funds are sold by prospectus, which can be obtained from your financial professional or the company and which contains complete information, including investment objectives, risks, charges and expenses. Source: U.S. market—Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock market in general. Universes: mutual funds—Morningstar U.S. open-end equity funds; stocks—Morningstar U.S. stocks. Funds and stocks with missing data points were not included in the analysis. ©2009 Morningstar, Inc. All rights reserved. Used with permission. only 21 (0.2%) lost more than 75% in 2008. In contrast, 2,886 stocks (28.2%) out of 10,220 performed that poorly. When compared with the market, 69.4% of funds underperformed and 65.5% of stocks underperformed. It may be that diversification didn’t bring investors all the benefits they expected, but considering the case of “extreme loss” illustrated in this image, which you can download for free, it appears that mutual funds may offer better odds. Mutual funds still offer significant benefits Out of 12,973 stock mutual funds in Morningstar’s database, only 21 (0.2%) lost more than 75% last year. In contrast, 2,886 stocks (28.2%) out of 10,220 performed that poorly. When compared with the market, 69.4% of funds underperformed and 65.5% of stocks underperformed. It may be that diversification didn’t bring investors all the benefits they expected, but considering the case of “extreme loss” illustrated in the first image, it appears that mutual funds may offer better odds. Morningstar Advisor October/November 2009

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Morningstar Advisor - October/November 2009

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