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The 10 Hottest-Selling Funds in the First Half

Do these funds deserve all that money?

Russel Kinnel, 07/29/2008

I'm going to discuss an increasingly rare breed: funds that are getting net inflows. With the markets getting pummeled, not many funds are drawing investor interest. Because you may well be considering one of these funds as something of a safe haven in rocky times, I'll run through the 10 funds with the greatest inflows in dollar terms for the first half of 2008. To be clear from the outset, none of these funds are true safe havens. Most have lost less than their peers in this market--and I'd expect that most would do so in most down markets--but these are all long-term funds that will likely lose money when their respective markets go in the tank.

1. PIMCO Total Return Institutional PTTRX
Net inflows of $14 billion or 13% of assets.
Bill Gross and his team made a brilliant call that the housing bubble would burst and interest rates would fall as the effects knocked down numerous dominos in the economy. For the biggest bond fund in the world to be well positioned and help protect its legion of investors is heartening. Gross still makes mistakes but this a fine long-term holding. Individual investors are better off with Managers Fremont Bond MBDFX or Harbor Bond HABDX which are virtual clones of the PIMCO fund and charge the little guy less.

2. Vanguard Total Stock Market Index VTSMX
Net inflows of $9 billion or 9%.
This fund is getting its inflows mainly via Vanguard's target-date funds. Obviously an index fund that tracks the market will go down exactly the same amount as the market, so it's no safe haven--though I would add that index funds rarely end up in the bottom quartile during a bear market. I like seeing a boring low-cost index fund on a bestseller list like this. Be patient with a fund like this and you'll be rewarded.

3. Ivy Asset Strategy A WASAX
Inflows $6.8 billion or 81% of assets at the beginning of the year.
Wow. Ivy Asset strategy is a very bold fund that's been on the money of late. Last year a big bet on BRICs (Brazil, Russia, India, and China) paid off handsomely. That should have sunk the fund this year but they made huge short bets against the U.S. and Europe, so the fund is about flat for the year to date. Be prepared for the occasional nasty pothole when the managers' timing is off, but hats off to the great track record they've built.

4. Vanguard Total Bond Index VBMFX
Inflows of $6.2 billion or 11%.
You can apply everything I wrote for Total Stock market only insert the word bonds for stocks.PAGEBREAK

5. BlackRock Global Allocation MDLOX
Inflows of $6.2 billion or 26% of assets.
This fund was a Fund Analyst Pick long before it became the flavor of the month. Denis Stattman isn't as bold as the Ivy Asset managers but he does make big top-down bets. Stattman made a small bet against the Russell 2000 this year and he sold some bank stocks early in the year. Those weren't on the scale of the Ivy fund's moves, but they worked like a charm. Stattman is approaching his 20-year anniversary on the fund so he makes a good case for why you can trust him with those moves.

6.-9. American Funds: Capital World Growth & Income CWGIX, Growth Fund of America AGTHX, Fundamental Investors ANCFX, and Capital Income Builder CAIBX
Inflows between $4 billion and $4.9 billion.
American is an excellent way to go in shaky times. Its excellent fundamental research and diversification provide some downside protection, but more importantly they enable the funds to earn solid returns when the markets rally. If you're a load fund investor, these are all worth considering.

10. Harbor International HAINX
Inflows of $3.9 billion or 12%.
Our 2007 International-Stock Fund Manager of the Year is having a fine follow up to a great 2007. Castegren and the team from Northern Cross trimmed their winning positions in Chinese stocks late last year but held onto some big natural-resources stocks like Petrobras. If your time horizon is greater than 10 years, this venerable fund is an excellent pick.

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