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Investors Are Going the Wrong Way on These Funds

Six good funds are hit with outflows, but three small good funds are seeing inflows.

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Generally, investors are going in the right direction. They are buying well-run low-cost funds and selling high-cost failures. But that’s not always the case. Investors also tend to lean too heavily on short-term performance. There are some funds where you should not follow the crowd.

I found very good funds with poor three-year returns, and some mediocre funds with strong three-year returns. A three-year figure tells you more about luck than skill, yet fund flows imply that it’s really all skill. But that’s something you can use to your advantage. I looked at funds whose one-year organic growth rates (net flows as a percentage of assets at the beginning of the year) signal that investors are headed in the wrong direction.

Keep the Faith in These Funds

Where the Crowd Is Right

Sometimes the trend does go in the right direction. I flipped the tables by looking for funds with the highest organic growth rates that are also Morningstar Medalists. Many of those that turned up on the list have pretty small AUM, so I’m not worried about them getting swamped. Still-small

Brian Schaub and Chad Meade, managers of Bronze-rated

We’re on board with sending more money to

Silver-rated

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