Why Global Funds Are All Over the Map
Wide divergence in returns highlights the importance of knowing what you own.
When investors try to determine why their fund is or is not performing well, they typically look for the most obvious reasons. If tech or energy has been hot, for example, they figure the funds that are thriving must invest more heavily in that sector than most peers do.
That idea does hold water to a certain extent. Broad themes do influence fund performance, and sometimes they can effectively explain a fund's ranking. Usually, though, there's more to the story. The specific traits of each fund's portfolio--or expense ratio, or other factors--can have a tremendous impact, sometimes overcoming the effects of larger patterns. A look at this year's world-stock category, which features an extremely wide range of performance, offers a potent illustration of this phenomenon.
Rising to the Top
For the year to date through Sept. 23, 2010, the range of performance for world-stock (also called global) funds, which split their portfolios between the United States and abroad, has been remarkably broad. The top performer, John Hancock Global Opportunities (JGPAX), has gained 20% so far this year, while the cellar-dweller (excluding funds with less than $10 million in assets) is DWS Climate Change (WRMAX), which has plunged 14%. And while those are the extremes, they aren't distorting the picture. Eight funds have positive double-digit returns, and even more than that land in negative territory.
Gregg Wolper does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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