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Rekenthaler Report

How Have the Largest Funds Performed?

Pretty well, all things considered.

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Buying the Leaders
In most industries, buying the leaders is a sound strategy. The best-selling automobile is well-made; the biggest wireless network is a reliable choice; and the top tourist destination is good fun. Maybe the same logic applies to mutual funds. Maybe investors can improve their odds by buying the very largest funds--which, presumably, have earned that status through superior results.

There will be rebuttals, chief among them that giant funds' happiest days are behind them. To the extent that managerial skill created their strong results, rather than merely fortune, that ability has been neutralized by their great bulk. Today's leaders will not be the next generation's winners. Invest instead in their smaller, nimbler competitors.

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John Rekenthaler has a position in the following securities mentioned above: PTTRX, DODFX. Find out about Morningstar’s editorial policies.