Of the 20 funds leading the 3 year 401k Accumulation Race at the end of December, only 3 were still in the running at the end of March--- Dodge and Cox Stock (#1), Oppenheimer Global A shares (#4), and Vanguard Explorer (#5)
In case you've forgotten how this slightly odd race is run, we take a list of the 209 funds with the most 401(k) plan assets, invest $100 in each for each of 36 months, and see how they run. Each month we run the race again, dropping the oldest month and adding the most recent month. Basically, we're taking a picture of early stage investment returns--- the kind you might experience if you were just starting a 401(k) plan.
Although the stock market was seriously sagging during the end of the 36-month period ending in December, the impact of the first quarter has been stunning. Here is how the two periods compare:
• December 31, 2000. Back then, 195 of 209 funds accumulated at least $3,600, which means they didn't lose money. Only 14 funds lost money. The best performer was Fidelity New Millennium, a mid-cap growth fund, which scored a $5,655 accumulation. The worse was Delchester Delaware A shares, a high yield bond fund, which accumulated only $2,858--- a loss. The average fund accumulated to $4,028.
• March 31, 2001. Only three months latter, 122 funds made money but 87 lost. The best performer was Dodge and Cox Stock, a large value fund, which accumulated $4,632. The worst performer was Putnam OTC Emerging Growth, a mid-cap growth fund, which accumulated only $2,458--- a major loss. The average fund accumulated only $3,669, which means it barely broke even.
Are there any other messages in the quarter of woe?
You bet. In the December three year period, 14 of the top 20 funds were growth oriented equity funds.
There were no fixed income funds in the top 20. Three months later, there were 13 fixed income funds in the top 20 and the number of growth equity funds had dropped to 2.
For the two mega funds in the list--- Fidelity Magellan and Vanguard 500 Index--- it was a painful quarter. Magellan fell from 96th to 154th while Vanguard 500 Index dropped from 153rd to 162nd. Investors in both funds lost money over the three-year period, accumulating only $3,378 in Magellan (a loss of $222) and only $3,332 in Vanguard 500 Index (a loss of $268). Whether you were just starting out or had an established plan, this has been a tough period for both of these funds. A lump sum investment in Vanguard 500 Index three years ago provided an annualized return of only 3.08 percent. Magellan did somewhat better with a 4.86 percent annualized return. A list of the top 20 funds for the period is below. The entire list, rank ordered and alphabetical, is on my website.
The Top 20 Funds in the 401k Derby: March 31, 2001
|Holding||Morningstar Category||3/31 Value|
|Dodge & Cox Stock||Large Value||
|Fidelity Low-Priced Stock||Small Value||
|Vanguard Windsor||Large Value||
|Oppenheimer Global A||World Stock||
|Vanguard Explorer||Small Growth||
|Vanguard Intrm-Term Bd Idx||Intermediate-term Bond||
|Fidelity Value||Mid-Cap Value||
|Amer Funds Growth Fund A||Large Growth||
|Vanguard Long-Term U.S. Trs||Long Government||
|PIMCO Total Return II Instl||Intermediate-term Bond||
|Vanguard Tot Bond Mkt Idx Is||Intermediate-term Bond||
|MAS Fixed-Income Instl||Intermediate-term Bond||
|Dodge & Cox Income||Intermediate-term Bond||
|Vanguard Tot Bond Mkt Idx||Intermediate-term Bond||
|Firstar Bond Immdex Instl||Intermediate-term Bond||
|Wells Fargo Divr Bond I||Long-term Bond||
|One Group Bond A||Intermediate-term Bond||
|Federated US Govt Bond||Long Government||
|PIMCO Total Return A||Intermediate-term Bond||
|Vanguard GNMA||Intermediate Government||
Source: Morningstar Principia Pro, March 31 dataDoes this list mean you should throw out your current plan choices and put all your money in one of these funds?
I don't think so. This list will change from month to month. We may be able to spot style and leadership shifts--- such as the move from growth to value that was the subject of a column last September --- but I don't expect these listings to find the one fund we should own for the rest of our lives.
We might gain a little respect for bonds, however...
Tuesday: The Investment Virtue of Stability