Even star stock funds take major abuse these days
— -- Your stock fund's performance probably isn't as bad as your most recent statement says. It's worse.
The average diversified U.S. stock fund had tumbled 19.6% this year through the end of September. For the first nine days of October, however, the average fund was down 37.4% for the year. Funds have tumbled 41.2% in the 12 months since the stock market peaked on Oct. 9, 2007, nearly as much as during the entire 2000-02 bear market.
Many of the funds hit hardest were value funds, which look for beaten-up, unloved stocks in hopes that they will eventually return to Wall Street's favor. Unfortunately, many value funds invested heavily in financial stocks, which have been hit the hardest in this bear market.
"Value investing doesn't necessarily mean safety," says Russel Kinnel, director of mutual fund research for Morningstar, the Chicago investment tracker. Value funds looked better early in the decade because growth funds had gotten hammered so badly. Growth funds look for stocks of companies whose earnings are poised to soar.
Foreign funds also were hurt by the rising value of the U.S. dollar. When the dollar rises in value, the value of foreign stock holdings falls.
For retirement investors, the bear market has wiped out most gains for the decade.
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