Seven Fund Predictions for 2005
Some of these might have a familiar ring to them.
Some of these might have a familiar ring to them.
Prophecy is a dangerous business. Even when you're right, you can get burned at the stake. Worse, you can be wrong. After all, it's tough to predict the future. As Yogi Berra might have said, "If I knew what was gonna happen tomorrow, I'd have done it already."
But in the mutual fund world, some things do seem likelier to happen than others. I wouldn't put money on any of the following events occurring, but I'm even less inclined to bet against them. Don't be surprised to see 2005 develop something along these lines.
1. A sector of the stock market will get hot. The financial media will feature articles and TV segments that highlight the big gains. Institutions and ordinary investors will pour money into funds targeting that sector. If an exchange-traded fund focusing on that area doesn't already exist, one will be created. A skeptical Morningstar analyst will write an article cautioning people not to get too excited about the sector. The sector will then rise even higher.
2. Japan, whose third attempt in recent years at a sustained economic recovery and stock-market rally seems to have floundered, will rally once again. Most likely, that will occur when other world markets are stumbling, making Japan seem all the more appealing. Articles will be published with headlines like, "Experts: This Japan Rally For Real." Money will flow into Japan-stock funds. The Japanese market will then stall, prompting articles headlined, "Just Another False Start?"
3. A number of funds will cut their expense ratios. Some will do so because they're forced to by a regulator. Others will do so on their own initiative. A grumpy Morningstar analyst will write an article complaining that most expense ratios are still too high.
4. At least one fund family will merge small or weak-performing funds into siblings that do not share the same managers or strategy. The fund company will gloss over that fact and instead draw attention to the potential savings for shareholders owing to the larger asset base that will result. The expense ratio will indeed drop--but not by much.
5. Congress will propose a flurry of legislation about mutual funds. The proposals will concern regulations, taxes, and other matters. Hearings will be held. Op-ed pieces will be penned. Congressmen and senators will rail about this and that. And in the end, not much will change.
6. Then, near the end of the year, a (perhaps overly cynical) Morningstar analyst will offer predictions for 2006--and the list will look very similar to this one.
7. Lest this collection appear too downbeat, here's one last prediction--and it's the one in which I have the most confidence. In 2005, many of you will buy the house you've wanted, pay a child's college tuition without having to take out huge loans, or retire on your own schedule with enough money socked away to ensure a nice, comfortable lifestyle for many, many years. And all of that will be possible only because long ago, you put in the time to learn how to choose quality funds and make a solid long-term investment plan, and then you made sure to monitor those funds and stick with that plan even when it took effort and perseverance. To all of you, congratulations--a year ahead of time.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.