Morningstar Advisor - April/May 2013 - (Page 70)

Screens Golden Oldies Keep on Truckin’ By Adam Zoll These funds that have been around since at least 1970 are among the best in their categories. They’ve outlasted Watergate and the Arab oil embargo, the 1987 market crash, the bursting of the tech bubble, the 2008 financial crisis, and countless bull and bear cycles in between, yet they’re still going strong. Although many of their competitors have come and gone, some mutual funds have stood the test of time and continue to serve investors who may be attracted, in part, to their longevity and the stability it implies. Out of more than 7,000 U.S. open-end mutual funds in Morningstar’s database, only about 140 (2%) have been around since 1970, and roughly half of those are U.S. large-cap stock funds. The very first U.S. open-end mutual fund, MFS Massachusetts Investors Trust MITTX, which was created in 1924, is still going strong today, with more than $4 billion in assets and a Bronze Morningstar Analyst Rating. 70 Morningstar Advisor April/May 2013 However, just because a fund has been around since the days of flower-power and psychedelic rock doesn’t necessarily mean it’s worth holding in the year 2013. For example, a fund may have earned a great reputation under a superstar manager who since has left. A case in point is Fidelity Magellan FMAGX, which was born in 1963 and soared to great heights under manager Peter Lynch in the 1980s but has been among the worst performers in the large-growth category during the past decade. Another consideration when thinking about buying a fund with a long track record is whether its strategy suits your needs and is right for today’s market environment. A process that has proved successful in the past might be less effective during periods of volatility, such as what we’ve seen in recent years. Even for funds that have been around for several decades, caveat emptor applies. Take into account the current fund manager’s skill and experience, the fund’s current process, and fees. We will use this screen, performed using Morningstar Principia, to find funds that have stood the test of time and that Morningstar’s fund analysts say are still among the best available in their categories. Special Criteria  Distinct portfolios only And Share Class Type /  Inst And Purchase Constraints  Closed-New Investment / And Fund Incept Date  1970-12-01 Our screen is a simple one. We applied a distinct portfolio screen to eliminate multiple

Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2013

Morningstar Advisor - April/May 2013
Letter From the Editor
The Pursuit of Happiness and Financial Advice
What Strategies Do You Use to Control Risk?
Driven to Succeed for Clients and Family
How to Assess a Portfolio’s Bond Risk
Luck, Skill, and Investing
Investments á la Carte
Investment Briefs
Investing’s No- Brainers Have Costs
A Defensive Ride
Risk On/On Risk
The Risk of Being Overconfident
Year of Living Dangerously
The Risk-Parity Approach
A Guide to Mutual Funds Running Risk-Parity Strategies
What Moats Tell Us About Risk
Risk’s Wake-Up Call
Seeing Is Believing
Why Investors Lag the Returns of Their Funds
Liquidity Signals
Pump Them Up
Golden Oldies Keep on Truckin’
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
Our Social Blind Spot

Morningstar Advisor - April/May 2013