![]() ![]() Rowe Price New Horizons Fund, said into his microphone, “I don’t worry about the level of the market every day. Then John Laporte, manager of the $4 billion T. If you want market-timing efforts from a fund, you should seek out only those funds that explicitly state their intention to attempt that sort of thing.Ī typical scene dramatizing these points took place at a recent conference in Chicago sponsored by the research firm Morningstar Inc., when a member of the audience asked a panel of four prominent fund managers how long they thought the stock market could keep forging ahead to record highs.Īt first, the question was met with silence and blank looks. It’s assumed you’ll do your own planning against this kind of hazard, ideally by diversifying holdings and taking a long-term view of your stock investments. These things are vital to understand in order to know what you reasonably can and cannot expect from a stock fund.įor one thing, it doesn’t make sense to think that either an index fund or an actively managed fund that emphasizes stock selection will provide much protection from broad market declines, whether they be brief setbacks or long, drawn-out bear markets. Managers of index funds take the idea a giant step further, eschewing stockpicking as well and simply setting up their portfolios to duplicate the behavior of the index they use as a model. If there is any cash-reserve cushion in their funds, it is probably there only temporarily while they look for new places to put it to work. ![]() Instead, they concentrate on so-called “bottom up” stock-picking, keeping their portfolios fully committed at all times to the best ideas they can find in the market. Most modern fund managers make no effort at all to time the stock market, operating on the assumption that short-term ups and downs in the economy and the markets are impossible to predict no matter how hard you try. With relatively few exceptions, a typical modern stock-fund manager may have nothing at all to say on the subject of where the Dow Jones industrial average, interest rates or the economy’s gross domestic product is headed.īefore you dismiss this as a cop-out, consider the way many stock funds are managed these days. Ask one of today’s top mutual fund managers for an economic or stock market forecast, and you’re likely to be disappointed.
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