Total money market mutual fund assets increased $2.18 billion to $2.802 trillion for the week, the Investment Company Institute said Thursday.

Assets of the nation's retail money market mutual funds fell $3.74 billion to $937.52 billion. Assets of taxable money market funds in the retail category decreased $3.36 billion to $735.85 billion for the week ended Wednesday, the Washington-based mutual fund trade group said. Retail tax-exempt fund assets fell $370 million to $201.67 billion.

Assets of institutional money market funds increased $5.91 billion to $1.865 trillion for the same period. Among institutional funds, taxable money market fund assets rose by $7.06 billion to $1.742 trillion; assets of institutional tax-exempt funds fell $1.14 billion to $122.89 billion.

The seven-day average yield on taxable money market mutual funds in the week ended Tuesday was unchanged from the previous week at 0.03 percent, said Money Fund Report, a service of iMoneyNet Inc. in Westboro, Mass. The 30-day average yield remained flat at 0.03 percent, according to Money Fund Report.

The seven-day compounded yield also remained at 0.03 percent, while the 30-day compounded yield stayed at 0.03 percent, Money Fund Report said. The average maturity of the portfolios held by money funds rose to 48 days from 47 days.

The online service Bankrate.com said its survey of 100 leading commercial banks, savings and loan associations and savings banks in the nation's 10 largest markets showed the annual percentage yield available on money market accounts was again unchanged from the previous week at 0.19 percent.

The North Palm Beach, Fla.-based unit of Bankrate Inc. said the annual percentage yield available on interest-bearing checking accounts was flat at 0.10 percent.

Bankrate.com said the annual percentage yield on six-month certificates of deposit fell to 0.31 percent from 0.32 percent the previous week. Yields on one-year CDs were unchanged from last week at 0.52 percent; slipped to 0.71 percent from 0.73 percent on 2 1/2 year CDs; and declined to 1.53 percent from 1.55 percent on five-year CDs.
source: abcnews.go.com

By Humberto Cruz, Tribune Media Services

If you're looking for a mutual fund that invests in stocks, would you want a fund that calls itself "relatively conservative" and, according to the prospectus, attempts to prevent losses as well as achieve gains? This fund has posted solid long-term returns, losing money in only two of 23 full calendar years since inception.

Or would you prefer a fund the prospectus says "may establish relatively large positions" in securities it finds attractive? (That means it may buy a lot of them, which may increase risk.)

For the past 10 years, this fund has beaten the Standard and Poor's 500 stock index by about 9 percentage points a year on average and the Lipper Mixed-Asset Target Allocation Growth Funds index by about 4.8 percentage points a year. But the fund lost 41 percent during the market meltdown from Oct. 9, 2007 to March 9, 2009.

OK. I asked trick questions, because I'm talking about the same fund: T. Rowe Price Capital Appreciation (PRWCX).

I am in no way picking on the fund or T. Rowe Price, which is a reputable firm. I would include its Capital Appreciation Fund on any short list of moderate-allocation equity funds worth considering. I'm merely using it as an example of the inherent risk of investing in stocks and of making decisions based on partial information.

Specifically, I want to discuss how to make better sense of a fund's performance numbers. Past performance, as regulators require funds to say, is no guarantee of future results. But past performance can help uncover risk.

Always ask the fund company and/or person trying to sell you a fund to tell you not only its average annual return over different periods, such as the past five or 10 years, but also year-by-year results (the prospectus will typically list returns for recent years, but not necessarily all since inception). Average returns may mask wild swings in year-to-year returns, a sign of a fund's volatility.

The CGM Focus Fund (CGMFX) would be a good example (again, I am not "picking'' on this fund but simply using it to illustrate a point). CGM Focus returned an average of 8.2 percent a year compounded for the five years ended Dec. 31, 2009, compared with just 0.8 percent for the average large-cap stock fund. But after a huge 79.9 percent gain in 2007, a year the average large-cap fund rose only 8.4 percent, CGM Focus plunged 48.2 percent in 2008, compared with a 38.6 percent loss for the average large-cap fund.

Also look at a fund's return compared with an appropriate index or benchmark. A fund may be down simply because the overall market is down, and even good fund managers have bad years. But a fund that consistently trails its index, even when it makes money, is hardly worth it unless it also lowers your risk of loss in bear markets.

Of course, you want more than good relative performance, or how a fund does compared with an index. During market declines, advertisements always seem to pop up boasting how a fund has "beaten the market" in recent periods. If you look at the fine print, you may discover the fund's returns have been puny, or the fund has lost money, just not as much as the index. To get a handle on potential losses, ask about returns during bear markets and worst 12-month period, not necessarily worst calendar year. Few people invest only on Jan. 1, and the worst returns may occur at other times.

Also ask about the fund's worst "drawdown," or maximum cumulative loss from a peak to a trough. That's a number a fund prospectus is not required to disclose but that some fund analysts consider the ultimate measure of a fund's risk.

For do-it-yourselfers, at quote.yahoo.com you can get, after you enter a fund's ticker symbol in the "get quotes" window, performance numbers over different periods and share prices over time.

Humberto Cruz is a columnist for Tribune Media Services. E-mail him at yourmoney@tribune.comsource: www.chicagotribune.com

Rob Carrick

Stocks are the ties that bind you to bonds.

Yes, it’s true that bonds have low yields. It’s also true that bonds are headed for a crew cut when interest rates rise. In the eyes of many people, the stock markets are clearly the place to be just now.

But while these objections to having a full commitment to bonds today are all valid, they ignore a key point about building portfolios the right way. Stocks are unpredictable and the only sound way for most investors to manage the volatility is to keep bonds in their portfolio.

“For most of the time in the past 13 years or so, bonds have been negatively correlated to stocks,” explains Michael Herring, managing director and investment strategist at BMO Nesbitt Burns. “When stocks are down, bonds are up. So they provide a nice diversification effect, a counterbalance that dampens the volatility of the overall portfolio.”

The upshot? Bonds are essential, but right now they look like a loser’s investment. Deal with it by following our Bond Survival Guide.

Let’s start with the right mix of stocks and bonds. For what he describes as a balanced portfolio, Mr. Herring suggests a blend of 35 per cent bonds and 65 per cent stocks. That’s a rough guideline, of course. You can adjust it according to how aggressive or conservative you are.

Once you find the right mix for your needs, resist the temptation to lighten up on bonds because of the current market outlook. Instead, think short term.

Short-term bonds mature in five years or less, mid-term bonds run up to 10 years and long-term bonds mature in 10 years or more. You get more interest with long-term bonds, but they’re the most likely to cause you problems when interest rates rise. So stick with bonds maturing in one to five years, Mr. Herring said.

Mutual Funds, ETFs

One option is to invest in mutual funds and exchange-traded funds specializing in short-term bonds. Or, you can buy individual bonds or guaranteed investment certificates and use the tried-and-true laddering approach. That’s where you divide your money equally into bonds maturing in one through five years. As a bond matures, you reinvest in a new five-year term.

Your returns will be low if you do this – maybe 1.5 to 2.5 per cent on a blended basis. But your portfolio will also be much more resistant to rising interest rates. Mr. Herring calculates that a five-year bond ladder would be only 40 per cent as sensitive to rising rates as the overall bond market.

Bonds maturing in 10 years or more present the biggest risk of jarring price declines. Let’s be clear here – bonds don’t stop paying interest when rates rise, but they do fall in price. Actual bonds will repay your upfront investment back at maturity, while bond funds and ETFs will rebound in price as interest rates fall in the future.

Still, even if you’re holding a bond until maturity, the potential price declines over the short term can sting.

How It Works

Some background: As bond yields rise, bond prices fall. If the yield on a 30-year Government of Canada bond were to move up by a full percentage point, the bond’s price would drop 18 per cent, according to Mr. Herring. Even if you’re holding to maturity, that’s quite a hole to see punched in your portfolio when your monthly statement arrives.

On the other hand, if you’ve got new money to invest in bonds, higher rates will be welcome. The annual maintenance of your bond ladder will help in this regard. “You’ll be given opportunities to invest at successively higher yields,” Mr. Herring said.

A lot of investors have been improving a bit on the low yields of government bonds by branching into bonds issued by financially strong companies. Mr. Herring said his firm believes both kinds of bonds are fully valued, which is to say they have room to fall in price as rates rise. At best, you’ll likely just get the interest paid on these bonds. The capital gains that investors have seen from bonds as interest rates fell are likely a thing of the past.

High-yield bonds, issued by less financially strong companies, may have a little room left to rise in price, Mr. Herring said. These bonds offer much higher yields than blue-chip companies and governments, but much more risk if the economy struggles. In fact, the risk profile of high-yield bonds is closer to stocks than that of government bonds.

While it’s essential to hold some bonds in your portfolio as a buffer against the stock markets, many investors have gone overboard since the 2008 market crash. Mr. Herring’s take on the right mix of stocks and bonds for today’s market? “We’re advocating a balanced investor hold fewer bonds than they hold stocks.”

How To Handle Bonds

1. Determine your appropriate asset mix of stocks and bonds and stick to it.

2. Use a five-year bond ladder, in which you stagger your holdings in bonds or GICs.

3. Avoid long-term bonds.

4. Recognize that both corporate and government bonds are fully valued now and vulnerable to price declines when interest rates rise.

5. Remember the rationale for bonds: They tend to go up when stocks go down.
source: www.theglobeandmail.com

ROCKVILLE, Md. (MarketWatch) — There are snappy headlines all over cyberspace right now about the Federal Reserve setting sail with QE2 — or a second round of “quantitative easing” policies, for those more aware of the famous ocean liner than economic jargon.

In layman’s terms, quantitative easing is a monetary policy used by central banks to stimulate the economy by increasing the supply of money in the system and boosting the excess reserves of banks. Or in more pejorative terms, the Fed is printing more money to satisfy Washington’s runaway spending and hopefully prop up an ailing economy.

I’ll leave the merits and menaces of QE2 — and the nautical puns — up to those on the rest of the Internet. The bottom line is that regardless of whether another round of quantitative easing is a success or failure, the result will be the eventual rise of inflation and devaluation of the dollar.

To help investors prepare their portfolios, here’s a 10-step inflation survival guide.
Get rid of your cash

This may be hard for many risk-averse investors to do, but the bottom line is that during periods of rapid inflation, your money is literally worth more today than it will be tomorrow. So “spend” it. Whether it means buying a car now instead of next year or investing in the stock market, that depends on your personal situation. But sitting on cash will cost you in the long run. Read “How to Invest $1,000 Now.”
Bet against the dollar

So what do you do with that cash? Well, the other side of the equation is that when inflation takes root, a nation’s currency typically devalues. That means you would be wise to bet against the dollar. A number of ETFs allow you to do this. PowerShares DB US Dollar Index Bearish ETF /quotes/comstock/13*!udn/quotes/nls/udn (UDN 27.01, -0.21, -0.77%) is an inverse play on the New York Board of Trade’s U.S. Dollar Index. If you’re more sophisticated about currencies and macro trends, you can play exchange rates between the dollar and other currencies like the yen or euro.
Get rid of Treasurys

U.S. Treasury bonds are bad news during an inflationary environment. That’s because as yields start to rise — and at nearly zero, they have to, eventually — bond prices naturally fall. That means you don’t want to be stuck holding the bag.
Bet against Treasurys

You can benefit from the flip side of the collapse in Treasury bonds by shorting them. You can do that by purchasing an inverse ETF just like the previous play on the dollar — for instance, the ProShares UltraShort 20 Year Treasury ETF /quotes/comstock/13*!tbt/quotes/nls/tbt (TBT 36.61, +0.17, +0.47%) . A more sophisticated play is to buy puts Treasury funds such as the iShares Barclays 20 Year Treasury Bond ETF /quotes/comstock/13*!tlt/quotes/nls/tlt (TLT 96.15, -0.18, -0.19%) . Either move not only protects your portfolio from a likely collapse in T-Notes but provides a nice potential for profits.
Buy Treasury inflation-protected securities

These types of U.S. Treasury bonds (known as TIPS for short) provide the safety of a government bond with the bonus of protection against inflation. You can buy these outright, or via the iShares Barclays TIPS Fund ETF /quotes/comstock/13*!tip/quotes/nls/tip (TIP 111.03, +0.12, +0.11%) . Unlike conventional Treasurys, these bonds see their value adjust with inflation to ensure you don’t get eaten up as the dollar fades. If you have any doubt whether or not TIPS work or how bullish Wall Street is on this vehicle, consider that in October the U.S. Treasury successfully executed its first-ever TIPS auction in which the bonds actually had negative yields. That’s because the specter of inflation is so likely that investors were willing to enter the investment in the red with the expectation of rising yield over the life of the investment that makes a short-term loss well worth it.

Buy gold

Gold has already significantly run up in price in 2010 with the expectation of inflation — along with a low-risk, bunker mentality among some conservative investors. But if inflation takes hold, this dollar-backed commodity could soar even higher. If this turns out to be the case, don’t be tempted by mining companies. Your best bet is to buy gold through a reputable dealer or through a gold ETF like the SPDR Gold Trust ETF /quotes/comstock/13*!gld/quotes/nls/gld (GLD 137.29, -0.37, -0.27%) . Read “Gold Prices at $10K — Optimistic or Just Insane?”
Buy crude oil

Like gold, crude oil is priced in U.S. dollars. As a result, when the dollar drops in value, it takes more dollars to buy the same amount of oil. That means oil prices rise in an inflationary environment, as do profits for pure plays in the crude oil sector. Retail investors cannot trade spot crude, but they can invest in an ETF such as the iPath S&P GSCI Crude Oil Total Return ETN /quotes/comstock/13*!oil/quotes/nls/oil (OIL 24.88, -0.12, -0.46%) , which reflects West Texas Intermediate (WTI) crude oil futures contracts. Then there are more conventional oil plays such as energy blue chip Exxon Mobil Corp. /quotes/comstock/13*!xom/quotes/nls/xom (XOM 71.71, -0.12, -0.17%) and pipeline partnerships such as Magellan Midstream Partners /quotes/comstock/13*!mmp/quotes/nls/mmp (MMP 56.53, -0.16, -0.28%) , which offer plump dividends.
Invest heavily abroad

A weak U.S. dollar implies higher returns can be found abroad. After all, if investors won’t be buying Treasurys as readily, they will putting their money somewhere else. As for where the opportunity lies, that depends on how much risk you’re willing to take. Many foreign stocks trade on domestic exchanges as ADRs and can readily be traded via your brokerage accounts. If you are not comfortable investing in a specific stock, you can invest in a specific region or currency via an ETF — such as the iShares MSCI Brazil Index ETF /quotes/comstock/13*!ewz/quotes/nls/ewz (EWZ 78.08, +0.12, +0.15%) as a pure play on Brazil, or the CurrencyShares Canadian Dollar Trust /quotes/comstock/13*!fxc/quotes/nls/fxc (FXC 99.12, -0.30, -0.30%) if you believe in Canada. You may want to consider broader global funds in the ETF and mutual fund arena such as the iShares Emerging Markets Index ETF /quotes/comstock/13*!eem/quotes/nls/eem (EEM 47.37, -0.19, -0.40%) or a whichever global mutual fund your 401k provider offers. Read “Top 5 Asia Stocks Trouncing the Market.”
Invest sparingly in domestic tech stocks

Technology companies seem to be a bedrock investment for any portfolio. Regardless of economic circumstances, the most innovative computers and software are necessary to our way of life and will always be in demand. Consider the massive launches that Apple Inc. /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 317.20, +0.55, +0.17%) pulled off in the recession with the 1.7 million iPhone 4 sold in the first three days, or 3 million iPads in about two and half months after its debut. And this doesn’t even acknowledge the weight of corporate IT spending as businesses upgrade networks and optimize productivity with the latest gadgets and software. You should never put all your eggs in one basket by abandoning the U.S. altogether — but realize that sluggish domestic stocks will suffer in amid a weak dollar environment. To root your portfolio in America, diversify with some domestic tech stocks.
Invest sparingly U.S.-based multinationals

Another way to invest in domestic stocks but avoid inflation is to take shelter in multinationals. Think blue chips like Caterpillar Inc. /quotes/comstock/13*!cat/quotes/nls/cat (CAT 82.50, +0.06, +0.07%) and United Technologies Corp. /quotes/comstock/13*!utx/quotes/nls/utx (UTX 75.39, -0.76, -1.00%) , which saw significant lifts to profits in the fourth quarter of 2009 thanks to a weaker dollar. That’s because a weak dollar actually lifts foreign operations of these multinationals and more than offsets challenges in the states. Consider that a year ago, United Technologies’ chief financial officer told Bloomberg that the company adds $10 million in operating income for each penny the euro gains versus the dollar. Or in the case of Caterpillar, a weaker U.S. dollar means cheaper exports — so foreign businesses can buy expensive machinery at a better price and are more likely to go shopping. Domestic companies like CAT and UTX are actually helped by a weak dollar — so seek them out as a way to balance your major investments abroad.

Jeff Reeves is editor of InvestorPlace.com . As of this writing, he did not own a position in any of the stocks or funds named here. Follow him on Twitter at http://twitter.com/JeffReevesIP .
source: www.marketwatch.com

Long-term mutual funds had an estimated $5.02 billion of inflows as investors added money to stock funds for the third time in four weeks, while hybrid and bond funds continued to bring in cash, according to the Investment Company Institute.

Bond funds have thrived, as they typically do in a lower interest-rate environment, while stock funds have failed to consistently attract new investment for more than a year. ICI posted an inflow streak during the summer in which nearly $50 billion was added to mutual funds, almost entirely on bond funds, before posting outflows at the end of August.

Meanwhile, funds in total have reported nine straight weeks of inflows, a combined $50 billion on an unrevised basis. Money has been added to the fund on a net basis for 22 of the past 23 weeks.

For the week ended Nov. 3, ICI reported that stock funds had inflows of $729 million, compared with outflows of $2.41 billion the prior week. U.S. equities had outflows of $1.13 billion, while $1.86 billion was added to foreign funds.

Last month, stock funds reported their first weekly increase since May, ending a 23-week streak that saw nearly $92 billion pulled from the funds. The recent trend of inflows was due to continued investment in foreign-focused funds, while outflows from domestic equities moderated.

At the same time, bond funds took in $3.54 billion, down from $5.35 billion the previous week, said ICI. Taxable funds had inflows of $3.14 billion and municipal ones added $405 million.

Investors also put $745 million into hybrid funds, compared with prior-week inflows of $356 million. Such funds can invest in both stocks and fixed-income assets.

Meanwhile, assets in money-market funds climbed by a net $15.92 billion in the week ended Tuesday as investors added money to prime and government funds, according to iMoneyNet.

IMoneyNet's seven-day yield on taxable money-market funds held steady at the record low of 0.03% for the third consecutive week. The yield has remained low after the Federal Open Market Committee last week said it would keep the target federal-funds rate for interbank lending in the range of 0% to 0.25% for "an extended period."

Cash rushed out of money-market funds in the first half of the year due to low yields, and despite a small reprieve during the summer, the fund flows have been mixed in recent months. Morningstar Inc. earlier Wednesday reported outflows continued for money-market funds in October, as investors redeemed a net $16.6 billion.

For the week ended Tuesday, total assets in money-market funds climbed to $2.784 trillion, said iMoneyNet.

Taxable funds grew $15.2 billion to $2.457 trillion as institutional investors added $17.33 billion and individual investors took out $2.13 billion. Prime funds, which invest in securities such as commercial paper, had $9.93 billion of inflows, while government funds had $5.27 billion added to them.

Tax-free funds had inflows of $718.2 million, putting asset totals at $327.09 billion. Yields for seven-day funds fell to 0.03% from 0.04% but held steady at 0.03% for 30-day funds.
source: online.wsj.com

SAN FRANCISCO (MarketWatch) — In the late 1990s, Stephen Roseman had a whiteboard in his office to keep track of all the companies in the nascent video-on-demand sector.

But for all the hype, it would be years before video on demand was widely adopted. These days, according to Roseman, many people can barely remember life without the technology.

This anecdote is how Roseman explains why he left the hedge-fund world to start a mutual fund. While talk of alternative strategies in the form of a mutual fund raged for years without much happening, it’s now beginning to take off and apparently is going to be big.

Others agree — even investors who have backed hedge funds for years. “We’re at the very early stages of a multitrillion-dollar wave that’s going to wash over the long-only asset-management industry,” said Charles Krusen of Krusen Capital Management, which has invested in hedge-fund giants including Paulson & Co., Moore Capital and D.E. Shaw.

“For the mutual-fund industry, hedged mutual funds provide equity-like returns with less volatility, with additional transparency and regulation,” he added. “We think there’ll be a huge move to these types of funds.”

Roseman, chief executive of New York-based Thesis Fund Management, oversaw about $2 billion in assets at hedge-fund firm Kern Capital Management between 2003 and 2005. Earlier this year, he launched a mutual fund called the Thesis Flexible Fund /quotes/comstock/10r!tflex (TFLEX 9.99, -0.03, -0.30%) .

He isn’t the first hedge-fund manager to do this. AQR Capital Management, co-founded by Clifford Asness, raised more than $1 billion in less than a year after launching several mutual funds.

But Roseman reckons he’s at the vanguard of a movement that will see more managers take their trading skills to the retail-investing arena. “It’s not that people don’t want the strategy; it’s that they don’t want the hedge-fund structure,” he said. Watch Roseman talk about Thesis Flexible Fund in MarketWatch video.
Hedge vs. mutual

Hedge funds take short positions — bets on falling prices — as well as long positions that benefit from rising valuations. They can also use borrowed money, or leverage, to magnify returns. They usually lock investor money up for a quarter or more, and some are free to trade any securities or derivatives anywhere in the world.


Stephen Roseman, Thesis Fund Management

The goal is to generate positive returns, irrespective of the direction of the overall market. This is usually all wrapped up in a limited-partnership structure where the manager charges an annual fee of 2% or so and takes about 20% of any profit each year.

That “absolute” return goal contrasts with traditional mutual funds, which try to beat benchmarks such as the S&P 500 Index /quotes/comstock/21z!i1:in\x (SPX 1,219, +5.31, +0.44%) .

Hedged mutual funds use some of the tools and strategies common to hedge funds, such as short-selling and some leverage. But they also offer the benefits of mutual funds, such as daily liquidity and lower fees.

Investment bank Goldman Sachs Group Inc. /quotes/comstock/13*!gs/quotes/nls/gs (GS 167.22, +0.67, +0.40%) , one of the largest hedge-fund managers in the world, advised investors to add this new breed of mutual fund to their portfolios in a late September white paper.

The 2008 financial crisis left many uncertain about whether a traditional mix of equities and bonds can generate enough return, the bank said, noting that investors pulled $234 billion from U.S. stock mutual funds in 2009.

Adding hedged mutual funds to a traditional portfolio of 70% equities and 30% fixed income may generate higher returns with less volatility over time, according to the Goldman white paper.

These types of funds — which Goldman calls nontraditional mutual funds — have been around since the 1980s. But they’ve proliferated in recent years.

Goldman analyzed flows of money into these types of funds using data from Morningstar /quotes/comstock/15*!morn/quotes/nls/morn (MORN 50.61, +1.54, +3.14%) , Lipper and Strategic Insight. Morningstar calls them “alternatives,” while Lipper gives them the name “global flexible portfolios.” In Strategic Insight’s world, they’re “strategic income” funds, the bank said.

In 2005, these funds pulled in a net $29.7 billion, or 11% of total long-term mutual-fund flows. In 2009, they took in a net $121 billion, or a quarter of mutual-fund industry flows. In the first half of this year, a net $56.5 billion flowed in, or 27%, Goldman indicated.

“The mutual-fund industry will likely continue to see the emergence of new and innovative strategies,” the bank wrote in the white paper. “As investors gain a better understanding of these strategies, adoption and usage will increase, but currently there remains significant growth potential.”
Warming to the subject

Brad Alford, who invested in hedge funds for more than two decades for institutions including Duke University’s endowment, is a convert to hedged mutual funds.

Alford is now chief investment officer of Alpha Capital Management, which offers managed accounts that invest in several large hedged mutual funds.

His picks include the BlackRock Global Allocation fund /quotes/comstock/10r!malox (MALOX 19.50, +0.05, +0.26%) , Pimco’s All Asset All Authority fund /quotes/comstock/10r!pauix (PAUIX 11.26, +0.01, +0.09%) and Ivy Asset Strategy /quotes/comstock/10r!ivaex (IVAEX 24.60, +0.12, +0.49%) . “There are so many great mutual funds that look like hedge funds now,” Alford said.

The major difference is that hedged mutual funds are structured under the Investment Company Act of 1940, while hedge funds are usually limited partnerships.

All the Investment Company Act funds have to offer investors the ability to withdraw their money every day — daily liquidity, as Alford and others call it.

In contrast, during the financial crisis, many hedge funds froze redemptions or limited withdrawals in other ways. That surprised and angered some investors, and it’s a big reason why hedged mutual funds are gaining more of a following now, Alford commented. source: www.marketwatch.com

With nearly 8,000 mutual funds on the market, there are already plenty to choose from. Yet in a typical year a few hundred new offerings pop up.

Don't write off all these freshman funds. It's likely a select group will prove their mettle through good markets and bad, including a handful of recent offerings from managers with strong track records.

Yet too many try to tap into fleeting investor moods influenced by the market's latest moves. Often, new funds reflect old thinking. That's because a launch typically takes more than a year, from a glimmer in a fund company executive's eye to regulatory approval.

Many of the newest funds were conceived during or just after the financial crisis. It was a turbulent end to a decade that got off on the wrong foot when the dot-com bubble burst. Taxable bonds ended up posting an average annual return of 6.3 percent over the last decade, compared with an average annual loss of about 1 percent for stocks in the Standard & Poor's 500.

That surprising outcome may explain why so many new funds aim to protect investors from stock declines.

"They're responding to the market fears and frustrations over the past 10 years," says Dan Culloton, associate director of fund analysis with Morningstar. "A lot of it is just pure-and-simple rearview mirror product management."

Many of the 150 funds that have hit the market in the last six months are traditional stock funds — not much different from the ones that typically delivered returns approaching 10 percent, before trouble hit last decade. But many of the new funds take a sharply different tack, in reaction to recent events:

Go long AND short: Morningstar counts 18 new funds — one of every eight launched since May — in its long-short category. Just over a year ago, there were only 78 funds total in the entire category.

Investing long is betting a stock will eventually rise. Combining that traditional approach with a short strategy means also trying to take advantage of stocks expected to fall. If the market declines an investor can still profit.

Hedge funds pioneered long-short investing. Now the approach is also available in mutual funds within reach of average investors.

These funds attempt to limit losses when stocks are falling. But if markets rise, expect to lag.

Emerging market boom: Seventeen new funds focus on emerging markets, fast-growing countries like China, India and Brazil that have recently rewarded investors. Emerging markets stock funds have returned an average 28 percent over the past 12 months, compared with the 16 percent rise in the Standard & Poor's 500.

Most of the new offerings invest across a wide swath of emerging markets, while a few target regions like Asia or Latin America. Two are bond funds: Oppenheimer Emerging Markets Debt (OEMAX) and Invesco Emerging Market Local Currency Debt (IAEMX).

Adding such holdings to mostly U.S.-focused portfolios will typically boost returns, because emerging market economies are likely to continue growing faster than our own. But expect bumps along the way, since emerging market stocks tend to be unusually volatile.

Heavy on the commodities: Nine new funds concentrate on commodities. Investments in gold or oil, or crops such as corn and wheat, often don't rise or fall in synch with stocks, and can fare well even during times of inflation. One entrant to the category is T. Rowe Price Real Assets (PRAFX), which invests in real estate, energy, and precious metals and mining stocks. It's from a large, well-known fund company, and carries a modest annual expense ratio of 0.85 percent.

Such funds should probably be used sparingly, because commodities are volatile. Consider what happened with oil, which peaked at $147 a barrel in mid-2008, only to tumble below $40 months later when the financial crisis hit.

Morningstar's Culloton argues some new funds are worth a look, based on the strength of their managers' records at older funds. A few enticing new products on the market or in the pipeline:

Fairholme Allocation. Bruce Berkowitz, chosen in January as Morningstar's Domestic Stock Fund Manager of the Decade as well the top manager of last year, filed with regulators last month to launch his company's third fund.

Berkowitz built his reputation at Fairholme Fund (FAIRX), which has grown to nearly $17 billion from less than $11 billion in January. Investors have flocked to the stock fund because of its record: in the top 1 percent of its peers over the past five- and 10-year periods. Fairholme Allocation proposes to keep a focused portfolio of stocks, bonds and cash, with no restrictions on how much to invest among those categories at any one time.

Osterweis Strategic Investment (OSTVX), which debuted Aug. 31, also takes a wide-ranging approach, holding stocks, bonds and cash. The new fund is noteworthy because it comes from the company behind the $1.2 billion Osterweis Fund (OSTFX), which has a reputation for protecting investors when stocks are tanking.

Calamos Discovery Growth (CADGX), a midcap stock fund launched in June. Calamos Investments is best known for its expertise in half-stock, half-bond hybrid securities called convertibles. Its best-known fund is the $3.3 billion Calamos Convertible (CCVIX).

Morningstar's Culloton says these four new funds need to prove themselves, despite the strong reputations their managers bring. That's why Morningstar doesn't even rate funds until they have three-year records.

"But if you find a new fund from a good shop, with managers who have a strong record, you might be more inclined to take a flyer on it than with other new funds," he says. "Those can be hidden gems."

Mark Jewell is a columnist for The Associated Press. His column appears on Thursdays.
source: www.northjersey.com

Nov 10, 2010 - Shariah-compliant mutual funds are probably not the best performers in a bullish market of current times, where the rally is primarily driven by banking stocks. But in a slightly bearish market these funds give decent returns.

In India, this type of funds is yet to become popular among the masses. As a result, currently, the number of this kind of mutual funds is just a handful.
But we may see more fund houses coming up with such funds in the time to come. Currently, Taurus Mutual Fund has Taurus Ethical Fund, Benchmark Mutual Fund has Shariah Benchmark Exchange Traded Scheme and Tata Mutual Fund has the Tata Select Equity Fund. If you are planning to invest in these funds, then below are a few points that may help you to understand them.

What are Shariah-compliant funds?
Shariah-compliant funds are investment vehicles governed by Islamic laws and fully compliant with the principles of Islam.

What is meant by compliance to the principles of Islam?
Shariah-compliant funds are prohibited from making investments in industries categorised as morally deficient, such as those related to gambling or alcohol. This is because Islam does not allow any form of exploitation. Any kind of investment in conventional banking is outlawed. With the concept of debt also contrary to the principles of Islam, investment in highly-leveraged companies is also not permitted for Shariah-compliant funds. These funds do not invest in sectors such as liquor, tobacco, consumer goods, finance and banking and in interest bearing securities.

What are their current assets under management?
The three funds mentioned above currently manage assets worth Rs170 crore.

Are the investors in these funds only from the Islamic community?
According to a couple of fund managers, majority of the investors in these funds are from non-Islamic community.

In which markets do these funds perform well?
According to fund managers these funds perform well in a bearish market and not in bullish market of recent times. That is because the current rally in the market is led by stocks in the banking sector and Shariah-compliant funds do not invest in banking stocks.
source: www.dnaindia.com

You know all about mutual funds, and quite likely own some in your portfolio. You’re also probably familiar with exchange-traded funds, which combine the diversification of mutual funds with the trading flexibility of stocks.

But do you know the difference between a segregated fund and a closed-end fund? And what, exactly, is a hedge fund? Hint: It’s not money the neighbours pool together to keep their bushes looking neat and tidy.

Well, wonder no longer. Today, we’re taking a short walk through the fabulously fun world of funds. So grab hold of the rope, kids, and let’s begin.

Mutual Funds

Mutual funds are the most popular investment vehicles out there, with Canadian assets under management of about $720-billion, according to Investor Economics.

By investing a pool of capital in stocks, bonds and other assets, mutual funds provide benefits such as diversification, professional management and liquidity. They’re a great way for people with limited funds to get started in investing, but management costs can be high, and you also have to watch out for front- and back-end “loads.” Most mutual funds are open-ended, meaning the fund doesn’t have a set number of shares. Rather, it issues new shares and redeems existing ones daily, at the net asset value of the fund.

Exchange-traded funds

Like mutual funds, ETFs are also open-ended. The difference is that ETF units can be bought and sold throughout the day on a stock exchange, whereas mutual fund orders are processed after the close of trading based on the day’s final prices.

Another difference is that most ETFs are designed to passively track an index, which keeps their costs low relative to active mutual funds that pay a manager who tries to beat the index (most don’t). Because they’re cheaper and more flexible than mutual funds, ETFs are growing in popularity, but the ETF industry is still only about one-twentieth the size of the mutual fund industry.

Segregated Funds

Segregated funds are issued by insurance companies and their chief selling point is safety. They’re called “segregated” because the fund’s assets are held separately from the insurer’s other assets, which protects investors in the event of the firm’s insolvency.

Seg funds provide exposure to rising markets but typically guarantee to return a minimum portion of the investor’s capital after 10 years – usually 75 per cent or 100 per cent – even if the market has tanked. Guarantees also kick in at death, and the assets are usually beyond the reach of creditors should a business owner get sued or go bankrupt.

All these guarantees come with costs, which is why not everyone is a fan of seg funds. “At the end of the day you’re buying an insurance policy,” says Jason Heath, certified financial planner with E.E.S. Financial Services Ltd. in Markham, Ont. Investors can accomplish the same thing at lower cost by having a conservative allocation of stocks and fixed-income investments, and by structuring their business affairs to keep personal assets away from creditors, he says.

Closed-end funds

As the name implies, closed-end funds issue a set number of shares and typically don’t sell new units or redeem existing ones. If you want to invest in a closed-end fund after its initial public offering, you have to buy shares on a stock exchange from someone who is selling.

This means the price is determined by supply and demand, unlike mutual funds and ETFs, which trade based on the underlying net asset value of the fund. Closed-end funds can trade at a premium or, more commonly, a discount to NAV.

While investors can come out ahead by buying closed-end funds that are trading at a hefty discount, you also have to watch out for risks, says Gail Bebee, author of No Hype: The Straight Goods on Investing Your Money. Some funds are thinly traded and can’t be easily bought and sold, and managers sometimes use leverage and exotic trading strategies, which can magnify gains – and losses.

Hedge funds

Hedge funds can go long, go short (bet that a stock will fall), use borrowed money, derivatives and just about any other speculative tool at their disposal. They’re less transparent than mutual funds, aren’t subject to the same regulation and their compensation structure is also different.

Typically, a fund will charge a management fee of about 2 per cent plus a performance fee of 20 per cent of any profits above a certain threshold. (And no, the fund doesn’t pay you when it loses your money).

While some hedge funds, true to their name, hedge their positions to minimize risk, others are highly speculative. Remember all the hedge funds that blew up during the financial crisis? “Part of the problem with performance bonuses is that it motivates the manager to take extra risk,” says Garth Rustand, executive director of the Vancouver-based Investors-Aid Co-operative of Canada, which provides fee-only services and information to investors. “There’s still a perception out there that big risk will get you big gains. Well, it doesn’t happen.”

Learning about the various types of funds can make you a more informed investor, but there’s really no need to pay a lot of fees or make things too complex, he says. Most people can do just fine owning a small number of low-cost mutual funds or index ETFs, and giving the more exotic fund classes a pass.

Comparing assets

Value of Canadian mutual fund assets: $720-billion

Value of Canadian-listed exchange-traded funds: $36.2-billion

Value of segregated fund assets in Canada: $83.3-billion

Value of hedge fund assets in Canada: $45.7-billion

Value of closed-end funds: $24.1-billion

Source: Investor Economics
source: www.theglobeandmail.com

There are flashy numbers of dividend pay outs in percentages declared by fund houses on a regular basis in newspapers, periodicals, websites, etc. These numbers attract investor eyeballs towards their schemes. Now, SEBI has stepped in and has asked fund houses to disclose their pay outs in rupee terms. This shows that investors are trying to get a clearer picture on their investment returns through dividends. However, investing by considering only historical returns and dividends in a mutual fund scheme is risky. Investors need to evaluate the risk involved in mutual fund schemes before investing and review their investments, say, at least once a year.

Investors may perform a small 5-step exercise to evaluate riskiness of particular mutual fund scheme, as described below

We will take a hypothetical example of ABC-Equity (G) scheme to compute its riskiness in our Paanch Ka Dum (Power of 5) concept

1) Alpha

Alpha basically is the difference between the returns an investor expects from a fund, given its beta, and the return it actually produces.

Computation- Alpha equals (Fund return-Risk free return) – (Funds beta) (Benchmark return- risk free return).

Example-1

Fund return (Fund performance in last one year) 75%

Risk free return 8%

Benchmark return (Sensex performance in last one year) 41%

Beta 0.69

By computing with above formula we will get alpha as 0.44 for this fund.

A positive alpha means the fund has outperformed its benchmark index. Whereas, a negative alpha indicates an underperformance of the fund. The more positive an alpha the healthier for investors.

Here, the fund has underperformed since an alpha we computed is less than beta. It means the fund has produced less returns considering the risks fund is taking while comparing it with actual return to the one predicted by beta.

Note- The ideal time period for analysing alpha and beta value is one year returns from their funds.

2) Beta

Beta is a measure of the volatility of a particular fund in comparison to the market as a whole, that is, the extent to which the funds return is impacted by market factors. Beta is calculated using a statistical tool called regression analysis.

By definition, the market benchmark index of Sensex and Nifty has a beta of 1.0.

It may be challenging for investors to compute it for each mutual fund scheme. However, one need not worry. Important statistical measures for various mutual fund schemes are easily available on financial websites like InvestmentYogi where mutual funds performance is tracked and analysed regularly.

Let us consider 3 possible scenarios in interpreting beta numbers

Sensex is assumed as benchmark index.

1.A beta of 1.0 indicates that the fund NAV will move in same direction as that of benchmark index. The fund will move up and down in tandem with the movement of the markets (as indicated by the benchmark)

2.A beta of less than 1.0 indicates that the fund NAV will be less volatile than the benchmark index.

3.A beta of more than 1.0 indicates that the investment will be more volatile than the benchmark index. It is an aggressive fund that will move up more than the benchmark, but the fall will also be steeper.

For example, if the beta of ABC-Equity (G) is 1.4 then it is considered as 40 percent more volatile than the benchmark index (beta of benchmark index being 1).

Similarly, in example-1, as we have considered beta of ABC-Equity (G) fund as 0.69 this means the mutual fund scheme will be less volatile than its benchmark index.

Note- Conservative investors should focus on mutual funds schemes with low beta. Aggressive investors can opt to invest in mutual fund schemes which have higher beta value for higher returns taking more risk.

3) R-Squared

As discussed above, beta is dependent on correlation of a mutual fund scheme to its benchmark index. So, while considering the beta of any fund, an investor also needs to consider another statistic concept called R-squared that measures the correlation between beta and its benchmark index. The beta of a fund has to be seen in conjunction with the R-squared for better understanding the risk of the fund.

R-squared values range between 0 and 1, where 0 represents no correlation and 1 represents full correlation. If a funds beta has an R-squared value that is between 0.75 and 1, the beta of that fund should be trusted. On the other hand, an R-squared value that is less than 0.75 than it indicates the beta is not particularly useful because the fund is being compared against an inappropriate benchmark index. This fund will not give returns similar to their benchmark index. The lower the R-squared the less reliable is the beta, and vice versa.

The R-squared of an index fund, investing in same securities and in the same weightage as the index, will be one.

Note- Beta and R-squared are calculated based on the historical data. They give an adequate estimate of risks to be evaluated by investors before investing.

4) Standard Deviation (SD)

The total risk (market risk, security-specific risk and portfolio risk) of a mutual fund is measured by Standard Deviation (SD). In mutual funds, the standard deviation tells us how much the return on a fund is deviating from the expected returns based on its historical performance. In other words can be said it evaluates the volatility of the fund.

The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its average return of a fund over a period of time.

In other words, it is a measure of the consistency of a mutual funds returns. A higher SD number indicates that the net asset value (NAV) of the mutual fund is more volatile and, it is riskier than a fund with a lower SD.

Note- For SD to be an effective tool, investors will need to use it in comparison with peer group mutual funds. For example, a large-cap mutual fund is to be compared with a large-cap mutual fund with the same investment objective(s).

5) Sharpe Ratio

Sharpe ratio (SR) is another important measure that evaluates the return that a fund has generated relative to the risk taken. Risk here is measured by SD. It is used for funds that have low correlation with benchmark index. This ratio helps an investor to know whether it is a safe bet to invest in this fund by taking the quantum of risk.

The higher the Sharpe ratio (SR), the better a funds return relative to the amount of risk taken. In other words, a mutual fund with a higher SR is better because it implies that it has generated higher returns for every unit of risk that was taken. On the contrary, a negative Sharpe ratio indicates that a risk-free asset would perform better than the fund being analyzed.

It tries to find out the excess return generated by a mutual fund over and above a risk-free rate of return such as an RBI bond or a post-office savings scheme, etc.

Lets say the Sharpe ratio equals 0.957 for a fund. As discussed above, the higher this ratio, the better a funds return relative to the amount of risk taken. Here, this fund could be a risky investment option for their investors since ratio is just near to 1 (approx.).

Quick View

Mutual Fund Evaluation Criteria–

Consistent Performer- Low SD- High SR- Higher ranked fund

Volatile Performer- High SD- Low SR– Lower ranked fund

Mutual Fund Evaluation Criteria-

Consistent Performer- Low SD- High SR- Higher ranked fund

Volatile Performer- High SD- Low SR- Lower ranked fund

Note- Comparison should be made with peer group for accurate evaluation.

Conclusion

This Paanch Ka Dum concept we just discussed to evaluate a mutual funds risk will enable an investor to take a wise decision on his mutual fund investments. An investor should not blindly invest by considering only past returns mentioned, but needs to do some research of the fund schemes and reviewing their performance at regular intervals.

These risk measure are readily calculated and are available on InvestmentYogis financial website. You can logon to www.investmentyogi.com and click on the mutual fund tab to look for the fund you wish to evaluate. You will find the latest data for all these parameters (under returns tab of a particular fund). However, the above measures cannot be viewed in isolation while evaluating the risks of investing in a mutual fund scheme. Other important parameters such as the corpus held, disclosure norms followed by the AMC, portfolio composition, consistency in investment objectives and strategy must also be considered.
source: sify.com

The Reserve Bank of India , among others, has voiced its concerns about the circularity of investments between banks and mutual funds . The time period chosen for this analysis was from December 2008 to November 2009. However, market sources are questioning why the central bank has chosen a year old period to do such an analysis, especially when it is in a position to access latest data. In the subsequent months, the central bank itself has expressed its concern on the issue and banks have also reportedly taken corrective action.

Indian business schools have always been on the multinationals’ radar when it comes to hiring fresh talent. Royal Bank of Scotland is one more multinational bank to have set its sights on the managerial talent from Indian business schools for its global offices. Its global market head was in India this week to make presentations at the Indian Institute of Management in Kolkata. RBS is said to have hired some 11 management graduates this season despite the slowdown in the global financial market. Most of them are expected to be in the treasury and risk management areas.

In a retrenchment mode?

One often sees heads roll when market are volatile. That is what has happened in HSBC Bank. Insiders say the British bank plans to move about 100 employees from its back office to the front office. While the management is actually looking at retrenching people, one is not sure if such a move would go down well, especially with the back office employees.

Janakalyan Bank chief quits

The chairman of Janakalyan Sahakari Bank, a state-based co-operative bank, RP Mishra, who has held this post for several years, has put in his papers, reportedly over differences with the Rashtriya Swayamsevak Sangh (RSS). Janakalyan Bank, which is among the best-managed co-operatives, has strong leanings towards the Hindu-right wing outfit. What is surprising is that it is very rare that one gets to see revolt in such a cadre-based organisation.
source: economictimes.indiatimes.com

Q. I am currently invested in the Pimco Total Return Bond fund, which I’m very happy with. A financial planner is trying to convince me selecting individual high-quality corporate bonds would be more beneficial in terms of protecting myself from potential future interest rate changes and fluctuations. Do you agree with his assessment? Do you favor mutual bond funds or individual bonds? I am near retirement and am concerned with asset preservation.

A. Without knowing more about your personal situation, it’s hard to say which strategy would be best for you. It depends on, among other things, your overall asset allocation, how much income you need, your risk tolerance and how much money you have to invest. Individual bonds may require large initial investments, so it could take a big chunk of cash to buy enough bonds to achieve the same impact as a mutual fund.

"Mutual funds are great vehicles for diversification, as they can allow a smaller investment to enjoy the benefits of greater diversification that you could achieve with larger pools of money," said Jody D’Agostini, a certified financial planner with AXA Advisors/RICH Planning Group in Morristown.

By comparison, when using individual bonds, the number of holdings an investor will be able to purchase is typically limited, and thus each particular security will have a greater impact on the portfolio.

"The investor should understand the concentration risk and the potential impact if one or more of the bonds were to default," said Brian Kazanchy, a certified financial planner with RegentAtlantic Capital in Morristown.

Kazanchy said you also should be cognizant of the fees that accompany your investments. With a mutual fund, the fund expense ratio is easy to look up in the prospectus or online, but individual bonds don’t have an expense ratio. Also, there are transaction fees which are very clear for mutual funds. With individual bonds, it is not very clear, he said.

"A bond broker is compensated by a bond spread — the difference between what the bond is purchased at and what it is sold for," Kazanchy said. "If an investor wants to purchase individual bonds on their own, they should have the knowledge and tools to evaluate the true cost of the broker’s compensation. If not, then they should stick to mutual funds."

The benefit of owning individual bonds is a measure of control, Kazanchy said, as the investor can decide if and when they want to sell or hold them to maturity. When holding shares of a mutual fund, you have outsourced control to the fund manager, who will decide how the portfolio is managed.

E-mail your questions to askbiz@starledger.com.
source: www.nj.com/business

Mutual funds investing in energy and natural resources are excellent long term prospects and should be part of all well diversified portfolios. This is borne out by the fact that in the last five years, natural resources funds have outperformed the next closest domestic equity fund category by a huge margin. Most of this success is attributable to the oil and natural gas sectors where fast depleting reserves coupled with rising demand have led to a steady increase in both commodity and stock prices. Energy mutual funds greatly reduce the risk involved in investing in this sector because they hold widely diversified portfolios.

Below we will share with you 5 top rated energy mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all energy funds, then click here.

Fidelity Select Natural Gas (FSNGX) invests heavily in securities of companies involved in the production of natural gas as well as transmission and distribution activities. The fund also purchases securities issued by explorations companies as well as those firms which provide services and equipment for such activities. The energy mutual fund has a ten year annualized return of 6.08%.

The fund manager is James McElligott and he has managed this energy mutual fund since 2005.

Putnam Global Natural Resources A (EBERX) seeks capital growth over the long term. It primarily invests in common stocks of energy and natural resources companies across the world. It focuses on acquiring value stocks and invests in large and mid-cap companies. The energy mutual fund returned 5.39% over the last one year period.

As of September 2010, this energy mutual fund held 57 issues, with 6.18% of its total assets invested in Rio Tinto PLC.

Invesco Energy (FSTEX) invests at least 80% of its assets are used to purchase securities of energy companies. This includes companies which produce or distribute conventional energy, as well as energy conservation and alternative energy companies. This energy mutual fund has a five year annualized return of 3.11%.

The energy mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.16% compared to a category average of 1.68%.

Vanguard Energy (VGENX) seeks long term capital appreciation. The majority of its assets are used to purchase common stocks of companies whose primary activities are energy related. This energy mutual fund has a ten year annualized return of 12.87%.

The fund manager is Karl E. Bandtel and he has managed this energy mutual fund since 2002.

Aberdeen Natural Resources A (GGNAX) invests the majority of its assets in domestic and foreign companies from the natural resources industry. It invests in companies of all sizes, ranging from well-known firms to smaller companies with significant growth potential. The energy mutual fund has a five year annualized return of 4.07%.

The energy mutual fund has a minimum initial investment of $ 1,000 and an expense ratio of 1.56% compared to a category average of 1.56%.

To view the Zacks Rank and past performance of all energy mutual funds, then click here.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfund/
source: www.zacks.com

Total money market mutual fund assets decreased $6.59 billion to $2.8 trillion for the week, the Investment Company Institute said Thursday.

Assets of the nation's retail money market mutual funds fell $1.05 billion to $941.26 billion. Assets of taxable money market funds in the retail category decreased $1.69 billion to $739.21 billion for the week ended Wednesday, the Washington-based mutual fund trade group said. Retail tax-exempt fund assets rose $640 million to $202.04 billion.

Assets of institutional money market funds fell $5.54 billion to $1.859 trillion for the same period. Among institutional funds, taxable money market fund assets fell $5.83 billion to $1.735 trillion; assets of institutional tax-exempt funds increased by $300 million to $124.03 billion.

The seven-day average yield on taxable money market mutual funds in the week ended Tuesday remained at 0.03 percent, the same as the previous week, said Money Fund Report, a service of iMoneyNet Inc. in Westboro, Mass. The 30-day average yield dropped to 0.03 percent from 0.04 percent, according to Money Fund Report.

The seven-day compounded yield also remained flat at 0.03 percent, while the 30-day compounded yield fell to 0.03 percent from 0.04 percent, Money Fund Report said. The average maturity of the portfolios held by money funds remained 47 days.

The online service Bankrate.com said its survey of 100 leading commercial banks, savings and loan associations and savings banks in the nation's 10 largest markets showed the annual percentage yield available on money market accounts was again unchanged from the previous week at 0.19 percent.

The North Palm Beach, Fla.-based unit of Bankrate Inc. said the annual percentage yield available on interest-bearing checking accounts was flat at 0.10 percent.

Bankrate.com said the annual percentage yield on six-month certificates of deposit was 0.32 percent, unchanged from the previous week. Yields on one-year CDs fell to 0.52 percent from 0.53 percent the previous week; slipped to 0.73 percent from 0.74 percent on 2 1/2 year CDs; and declined to 1.55 percent from 1.57 percent on five-year CDs.
source: sify.com

Regrets, you’ll have a few if you blindly follow the conservative, take-no-risk approach to investing that’s so common these days.

The returns paid by savings accounts, money market funds and term deposits range from roughly 3 per cent down to zero. Need more than that to get where you want to go, financially speaking? Then consider the Portfolio Strategy column’s list of 12 mutual funds for frightened investors.

The list was compiled by asking four independent mutual funds analysts to suggest funds for people who are nervous about the stock markets but want higher returns than they’re getting in safe investments. Only two restraints were put on the choices – no money market funds and no bond funds. Those categories are where safe money’s been sitting since the financial crisis.

These funds on our list can certainly lose money, but in all cases they offer a smoother ride than many of their peers. For more information, consult the fund profiles on Globeinvestor.com.

Dan Hallett, director of asset management for HighView Financial Group:

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
CI Signature High Income	1.56	17.7	7.5	4.5	2	-21.5	-18.7

Comments: Mr. Hallett cautioned that this fund isn't for ultra conservative investors because it did lose a fairly substantial amount in 2008. But while the mix of stocks, REITs, corporate and high yield bonds is aggressive by balanced fund standards, it's more conservative than a fund investing fully in stocks. Mr. Hallett also notes that the MER for this fund is one of the lowest in its class.

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
Mawer Cdn. Balanced RSP	1.01	7.5	7.5	4.1	2	-16.1	-18.7

Comments: This portfolio offers investors a bit of everything – bonds, cash, domestic and foreign stocks – in a single product at fees around 1 per cent per year, which is strikingly low. Mr. Hallett describes Calgary-based Mawer as a great firm that is competent in all investing categories and has a great track record. This is a fund of funds that holds other Mawer funds in its portfolio.

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
Hartford Global Balanced	2.6	2.75	5.94	n/a	0.78	-11.5	-23.4

Comments: Mr. Hallett based this suggestion on the idea that investors are overly focused on Canada. "The tide will shift more in favour of global investing again…at some point…and so many terrific opportunities exist outside of our borders," he said. About 70 per cent of the portfolio is stocks, so this isn't "a tepid bond fund." This fund began in 2007, so it lacks a long track record. However, lead manager Richard Jenkins is a respected fund industry veteran.

David Paterson, Paterson & Associates:

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
RBC Monthly Income	1.14	8.4	6.5	4.8	2.7	-11.3	-16.2

Comments: Mr. Paterson describes this as a very conservative balanced fund, with a rough 50-50 split between stocks and bonds. Volatility is below average for the Canadian neutral balanced category, and yet returns have consistently come in above average. This fund pays 4.75 cents per unit each month, which works out to a yield of roughly 4.4 per cent. This fund is available only for non-registered accounts.

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
BMO Guardian Mthly Dividend	2.17	12.4	6.5	2.3	2.7	-20.5	-16.2

Comments: This fund is a rarity in that it invests heavily in preferred shares, which are primarily vehicles for producing dividend income and offer limited capital gains potential. About 60 per cent of the portfolio is in preferreds, with the rest focused on dividend-paying common shares with high yields. Mr. Paterson noted that while this fund holds no bonds, he expects volatility to be in line with balanced funds.

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
Fidelity Dividend B	2.04	10.8	8.3	6.5	2.1	-22.7	-26.6

Comments: "This fund will provide investors with more volatility (or a bumpier ride) than my other picks, but I feel it is a good way for conservative investors to gain some exposure to the equity markets," Mr. Paterson said. Holdings are mainly blue-chip Canadian companies such as the big banks and TransCanada Corp. Volatility is below average for Canadian dividend funds and well below average when compared with Canadian equity funds.

David O'Leary, director of fund analysis Morningstar Canada

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
Mackenzie Ivy Foreign Equity	2.43	5.4	4.2	3.3	-1.3	-6.7	-30.8

Comments: Mr. O'Leary says this fund can underperform dismally in bull markets, but it holds up remarkably well in bear markets. That was certainly the case in 2008, when it ranked among the top global equity funds by protecting unitholders far better than its peers. This fund holds companies with strong brands and balance sheets, and it uses a buy-and-hold approach that means little portfolio turnover.

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
IA Clarington Cdn. Balanced	2.37	9.4	6.4	2.7	2.4	-21.5	-21.3

Comments: Mr. O'Leary's inclusion of this fund is based on the fact that it was taken over in mid-2009 by a firm run by Leigh Pullen, formerly with Mawer Investment Management. Mr. Pullen's firm, QV Investors (stands for Quality and Value) runs another fund similar to this and its worst plunge during the financial crisis was 11 per cent.

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
Discovery	2.62	5.6	4.2	2	-1.3	-26.3	-30.8

Comments: Mr. O'Leary calls this the quintessential deep-value fund, which means it focuses on truly beaten-down stocks with rebound potential. The managers changed last year, but a team approach to running the fund means a consistent approach will be taken. The portfolio has a weighting of about 16 per cent in cash these days, but in the past it has gone as high as 30- to 40-per-cent cash.

Jeff Tjornehoj, research manager for U.S. and Canada Lipper

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
CI Global Managers	2.39	0.9	4.2	1.1	-1.3	-16.7	-30.8

Comments: Mr. Tjornehoj said this fund "moves a little slower" than other global equity funds, a point that is driven home by its comparatively weak performance in the past year. The compensation for investors is lower volatility. "During the 2008 meltdown, it suffered only half the letdown that afflicted its peers," he said. Oddity: Five of its Top 10 holdings are exchange-traded funds, which are a low-cost competitor to mutual funds.

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
Dynamic Small Business	2.69	31.2	20.6	14.7	3.7	-18.1	-41.2

Comments: This fund is in the Canadian small- or mid-cap equity category, which means it holds stocks that are considerably more risky than others on this list. But within its niche, Dynamic Small Business has shown much less volatility than its peers. Check out the 2008 performance -- the loss was less than half the category average of 41.2 per cent (this attests to the risks of the small/mid-cap category).

Fund	MER (%)	One-Yr. Rtrn (%)	Peer Avg (%)	5-yr. Rtrn (%)	Peer Avg (%)	2008 rtrn (%)	Peer Avg (%)
Discovery	2.5	4.8	-1.1	5.1	-0.5	-8.2	-35

Comments: This fund has been holding about 21 per cent of its assets in cash lately, which will provide a cushion in a down market. You can quibble that high cash weightings also drag down returns when the markets are good, but this fund's results over the last 12 months have been much better than average. Like its sister fund, Ivy Foreign Equity, Ivy European stood up comparatively well in 2008.source: ww.theglobeandmail.com

source: money.usnews.com

U.S. News is releasing a series of stories highlighting top-rated mutual funds in various categories. These funds have performed well over the long term, are rated highly among the industry's analysts, and have low minimum investments, making them accessible to all investors—big or small. This is the third piece in a series of stories highlighting 10 categories that make up U.S. News's 100 Best Mutual Funds for the Long Term.
Click here to find out more!

Many large-cap value managers are the epitome of buy-and-hold investors. In this category, you'll find managers who seldom trade and invest with a long time horizon.

There are two types of value investors with one important distinction, says Morningstar analyst Michael Breen. One type invests in high-quality, dividend-paying companies with strong fundamentals that are trading at a cheap price. The other, Breen says, "tend to be a lot more very deep contrarian investors who will buy very troubled companies thinking that the [company is] going to turn it around."

Investors should first consider their risk tolerance before choosing among funds in this category. Out-of-favor companies may take a long time to rebound. Many managers pride themselves on making bets on beaten-down companies before the market recognizes the companies' potential to turn things around. Such funds may not shine during strong market rallies, but the undervalued stocks in their portfolios can provide consistent returns over the long term. Often, these funds invest in sectors like healthcare, consumer staples, and financials (because of the industry's historically high dividend payouts) rather than traditional growth sectors like technology.

Over long periods of time, large-value funds have consistently beaten large-growth funds, Breen says, mostly because investments that generate dividends help you compound capital over time. Another trait to note: "Many of the managers in this category are bottom-up investors, and they believe in concentrated portfolios," Breen says. The funds may invest heavily in a single sector of the market or in a few companies they have strong convictions about, which can make them risky choices.

[See Value and Growth: Why Investors Need Both.]

With that in mind, here are U.S. News's best large-cap value funds for the long term:

Yacktman Fund (symbol YACKX). The managers of this fund run a concentrated portfolio of stocks that generate strong cash flows for a fairly long period of time. At times, when they believe the market is overvalued, they'll hold a decent amount in cash. (Currently, 10 percent of the fund's assets reside in cash.) Two of the fund's top three holdings are soft drink giants Coca-Cola and Pepsi. The fund has returned an annualized 12 percent over the past 10 years. Its annual expenses are 0.93 percent.

Invesco Van Kampen Growth and Income (ACGIX). This fund is currently heavy on financial services companies like JPMorgan Chase and Bank of America. Management tends to gravitate toward out-of-favor companies. At times, that strategy has meant trouble for the fund; its stake in BP and Anadarko Petroleum sank following the oil spill in the Gulf of Mexico. Those two picks have hurt the fund's recent returns, but over the long term, its performance has been steady. Over the past 10 years, the fund has returned 3 percent per year, on average. It charges annual fees of 0.88 percent.

California Investment Equity Income (EQTIX). This fund may take you for a bumpy ride, but it's long-term returns are among the highest in its category. Currently, its holdings are close in line with the S&P 500, which is unusual for the fund. Management will sometimes make big sector bets. Recently, Caterpillar has boosted the fund's returns, while big banking names like JPMorgan and Goldman Sachs have been somewhat of a drag on performance. Management looks for solid, dividend-paying companies to provide current income as well as capital appreciation to its shareholders. The fund has finished among the bottom of its category in several recent years, but over the past 10 years, it has gained an annualized 3 percent. Its annual fees are 0.99 percent.