Third quarter of '02 a rough one for stock funds
There's no way to sugar-coat it, the third-quarter of 2002 was an ugly one. How ugly was it? The worst since 1987.
Mutual fund investors haven't had much to cheer about this year. With the average stock fund down 17.50 percent during the third-quarter alone, equity shareholders have seen the average performance of stock funds fall over 25 percent this year.
As far as the carnage goes, investors could feel it in almost all types of stock fund categories. In the quarter, nearly nine out of every 10 Lipper equity classifications posted double-digit losses. Three of those experiencing the biggest drops: Science and Technology funds, off over 26 percent; Latin American funds, down over 23 percent; and European Region funds, off 22.7 percent.
Funds loosing the least over the past 13 weeks ending September 30, included Balanced Target Maturity funds, down 1.13 percent; Gold Oriented funds, off 3. 75 percent on average; Health and Biotechnology Funds, down 8.91 percent; and Real Estate funds, off. 8.9 percent.
Of Lipper's 41 different equity classifications, the only one to advance was the Specialty Diversification Equity fund group. That's the category containing funds that short the market and those that are market neutral. Funds in this grouping were up on average over 3 percent.
Looking at the 15 fund types that make up the U.S. Diversified Equity Funds's performance. you'll find the average fund down 17.17 percent. That's the second worst quarter for this group since the crash of 1987. And, the last two quarters' performance the worst since 1974. ( Within the U.S. Diversified Equity Funds category are all types of large-, medium, and small-cap funds, S & P 500 funds, equity funds and Specialty Diversified Equity funds.)
For those keeping track, only 89 of the more than 10,000 equity funds tracked posted positive returns for the quarter.
It's no secret that the reasons behind the market's performance are tied to the worry of war, scandals on Wall Street, disappointing earnings reports and investors who are both tired of seeing the value of their fund accounts chopped and fearful about investing. That being said, at current market levels, there are plenty of investment opportunities even though the level of risk---particularly risk that's event driven---is high.
Now with the third quarter behind us, and September's showing in the Dow Jones Industrial Average the worst September since 1937, what's ahead? While no one knows for sure, history shows us that there is a seasonality to the market's performance. November through April have been brighter performance months than May through December have. And, the last quarter of the year generally turns in more positive returns that the other three.
According to The Wall Street Journal, the Dow Jones Industrial Average has shown positive returns about 71 percent of the time in the fourth quarter over the past 82 years. And since the crash of 1987, fourth quarter results have been up in 12 of the past 14 years.
Let's hope this year that that fourth quarter upward trend continues.
Dian Vujovich is a nationally syndicated mutual fund columnist, author of a number of books including Straight Talk About Mutual Funds (McGraw-Hill), and publisher of this web site.
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