Why investors are fleeing these funds in droves.
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As you'd expect from someone who writes a column called The Contrarian, I like to go against the grain and invest where others are fleeing. That's why I find a list of the funds with the greatest redemptions intriguing. The catch, though, is that some funds are getting redeemed with good reason, so you have to pick your spots. In addition, redemptions can cause problems at a fund and make a bad situation worse by driving up trading costs and forcing managers to sell when they'd rather be buying.
Here's a look at the funds that have had the most dollars pulled out so far this year. The figures are through Oct. 31, 2007.
Vanguard 500 Index
This fund is as good as it's ever been, so I wouldn't join the pack fleeing the door. It's still a well-diversified low-cost index fund that closely tracks the S&P 500. Investors are bailing for two reasons. First, as a blue-chip-dominated index, this fund's returns lagged a lot of fund's from 2000-06 as small caps dominated. Second, Vanguard has recommended Vanguard Total Stock Market Index
Fidelity Growth & Income
A third of assets have bailed on this fund, and it's easy to see why. The fund is working on its fifth straight year of lagging its peers and the S&P 500. Manager Timothy Cohen took over in 2005 after a strong run at Fidelity Export & Multinational
I wouldn't be surprised to see redemptions turn to inflows shortly at this closed fund. Harry Lange has hit it big with sizable growth-stock bets such as Nokia
Like Fidelity Growth & Income, this fund's slump began in 2003. However, this fund is breaking out of its doldrums with a robust 15% gain on the year. That's a welcome change. On the downside, the fund just changed leaders. Jeff Everett left and was replaced by Tucker Scott, who had managed Templeton Foreign Smaller Companies
American Century Ultra
Much like Templeton Foreign, this fund has had a manager change and a rebound. One big difference is that this fund's slump was much more brutal. Even with this year's rebound taken into account, this fund's trailing three- and five-year returns are still in the bottom quartile of large-growth funds--hence the redemptions. I take heart in the fact that American Century's new leadership has a good plan for reinvigorating the firm and has already produced some positive results at its besieged flagship. However, the rebound has as much to do with a momentum rebound as changes in personnel and strategy, so I wouldn't rush in just yet.