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By Christine Benz and Shannon Zimmerman | 08-15-2013 10:30 AM

Rebalancing Stocks? Look to These Large Gold-Rated Funds

Investors might be looking to reallocate their assets as stocks continue to run up, but several large-cap equity funds could fit the bill.

Christine Benz: Hi. I’m Christine Benz for Morningstar.com. Investors have been adding money to stock funds again, but do they risk coming late to the party? Joining me to discuss that topic is Shannon Zimmerman. He’s associate director of fund analysis with Morningstar.

Shannon, thank you so much for being here.

Shannon Zimmerman: Good to be with you, Christine.

Benz: Shannon, we’ve been observing fund flows recently. We’ve seen that equity-fund flows have actually turned strongly positive after investors being pretty negative on stock funds for the years prior. Let’s talk about what investors should make of that. If they’re adding money to stock funds, is that a wise thing to do given how much stocks have rallied so far in 2013?

Zimmerman: It’s a really good question, and of course, what you wish happened is when the stock market cratered, people went in, but they didn’t.

Benz: 2009, we didn’t see it happen.

Zimmerman: Exactly. A lot of the rally is very lengthy rally. We’re well into the fifth year of a strong run for the market. Gains are big. Actually, five years is among the longest of the bull markets in terms of market history. But whether or not people are coming late to the party depends on what part of the market you are talking about. In every market environment, there are some asset classes and some areas that outperform and those that underperform.

To me, what smart investors want to do is take a look at their asset-allocation game plan and a take look at where their current portfolio is. In all likelihood, their portfolio has been moved around by the market, as well. When they’re thinking about how they want to direct their next investment dollars, they should do that in a way that kind of gets them back to where they want to be in terms of their asset-allocation game plan.

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