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Fund Spy

Holy Smokes! These Funds Might Get Barbecued!

These duds might be cruising for a bruising.

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Most of the time I use this space to share ideas for funds to buy, but today I'm going to share some ideas on what not to own. I started by looking for overvalued assets. I used the price/fair value estimates we get from rolling up our stock analysts' fair values into exchange-traded fund portfolios to find out which categories looked the priciest. 

Price/Fair Value ETFs
Today, the most overvalued ETFs on average are in technology, mid-growth, and real estate. In addition, I used our Ibbotson Associates' estimates for fair value for different stock indexes. They suggest that the small-cap S&P 600 is the most overvalued.

With that information, I then selected some really bad funds in those areas. Overvalued assets and bad funds are a pretty treacherous combination. There's no certainty that they'll lose money--just a greater risk that they will.

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Russel Kinnel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.