Charles Rotblut will speak at the 2015 AAII Investor Conference this fall; go to www.aaii.com/conference for more details.
This is the 30th consecutive year that AAII has published an annual mutual fund guide. I am proud to say that throughout this 30-year period, the primary focus of our guide has not changed. It was and remains to give you important information about a variety of no-load and low-load mutual funds.
A lot has changed within the mutual fund industry, however. Our first guide covered a mere 153 mutual funds. We also excluded those funds that had less than $10 million in assets under management.
To put these numbers in perspective, the print version of this year’s guide lists more than 700 mutual funds. The online version includes close to 1,500 funds. Average AUM for large-cap stock funds was in excess of $2.2 billion—an unheard-of figure for a mutual fund back in 1982.
The choice of funds has grown exponentially in the past 30 years. Index funds that investors take for granted now, such as the Vanguard Total International Stock Index fund (VGTSX), were not even in existence when our first guide was published. (This Vanguard fund, started in 1996, has in excess of $45 billion in total assets.)
Then there are exchange-traded funds (—investment vehicles we could not have imagined back in 1982. ETFs now offer exposure to a variety of asset classes, often at a lower cost than a comparable mutual fund.
The primary advantage a mutual fund can give you over an ETF, of course, is active management. Actively managed ETFs are still in their infancy, whereas the majority of mutual funds you see in this guide are actively managed.
Investors should consider using mutual funds and ETFs interchangeably. Use the fund best-suited for your particular needs, regardless of whether it is a mutual fund or an ETF. If you are considering switching from a mutual fund to an ETF (or from an ETF to a mutual fund), be sure to consider whether the potential expenses charged justify the change.
Format Matches Last Year’s Guide
We carried over the format used for last year’s guide to this year’s guide. This includes the same information about performance, portfolio composition and expenses. Where possible, to make comparisons easier, the fund categories and information presented in this guide match those used in our 2010 Guide to ETFs. The Guide to the Top Mutual Funds starts on page 4.
On AAII.com, you will again find a downloadable spreadsheet with additional funds and data.
Mutual Fund Flows
Some of you may have seen headlines about money flowing out of mutual funds last year. These would have come from weekly statistics published by the Investment Company Instituteabout how much money is flowing into and out of mutual funds. Their data covers more than 95% of all mutual fund assets.
Last year, there were more than 30 consecutive weeks of outflows from domestic equity funds. Specific reasons are not given for the withdrawals, leaving market pundits to speculate. What we do know is that both individual and institutional investors own mutual fund shares. Thus, while the weekly flows number is interesting, it does not shed light on who is making the portfolio changes or why.
Tax Guide Updates
As I mentioned last month, our annual tax guide went to press literally a few days after Congress passed the new tax law. This did not give us much time to work with, and in certain cases forced us to rely on projections. We have been updating numbers on AAII.com, but I thought it would be beneficial to also give you an update in the printed magazine. You will find the updated numbers on page 40.
Wishing you prosperity,
Charles Rotblut, CFA
Editor, AAII Journal