Page 25 - ATODAY

BUSINESS A25
Monday 11 January 2016

Don’t get suckered: Last year’s US Survey:

fund winners often break bad Businesses add 257K jobs, most in a year

STAN CHOE C. S. RUGABER until the end of the year. several other recent re-
AP Business Writer AP Economics Writer Moody’s Analytics, which ports suggested the econ-
NEW YORK (AP) — It’s tempting to look at which mutual WASHINGTON (AP) — helps compile the data, omy slowed at the end of
funds did best in 2015 and just invest in those. Winners U.S. businesses stepped up seeks to adjust the numbers last year. Manufacturing
win, right? hiring last month, led by to account for the annual activity contracted for the
Not in the investing world. It’s tough for funds to stay on solid gains in construction “purge,” but isn’t always second straight month in
top, and last year’s winners regularly turn into this year’s and retail, a private survey able to do so fully. December, as factories cut
losers. found. As a result, December’s back sharply on hiring, the
Look at what happened to the handful of index and Payroll processor ADP said ADP report tends to be one Institute for Supply Man-
actively managed mutual funds that returned 40 per-
cent or more in 2014. Their returns towered over the 14 Sasha Vitalis, left, talks about job opportunities to job seeker Omar Delgado at a job fair in Miami
percent that a Standard & Poor’s 500 index fund pro- Lakes, Fla. Payroll processor ADP said last week that companies added 257,000 jobs in Decem-
duced. ber, the most in a year.
But seven of the 10 went on to lose money the follow-
ing year. You would have had a slightly better chance (AP Photo/Alan Diaz)
of making money in 2015 by picking a fund at random.
The figures dovetail with a raft of studies that suggest last week that companies of the highest each year. agement said on Monday.
investors should consider much more than just past per- added 257,000 jobs in De- Most economists continue Construction spending also
formance when choosing funds. cember, the most in a year. to forecast that Friday’s dropped for the first time
It turns out that even when funds perform well over long Construction companies government report will in 17 months in November,
periods, compared with similar funds, it doesn’t mean added 24,000 jobs, while show employers added as builders pulled back on
they will continue to do so. retailers and shipping firms about 200,000 jobs, while new hotels and other com-
A study released by Morningstar this week looked added 38,000. the unemployment rate mercial projects.
at fund returns in 14 categories, going back to 1996. The figures suggest that stayed at 5 percent. And fewer people signed
It identified which high-yield bond funds were in the employers are still hiring at “We don’t view the data contracts to buy homes in
top 20 percent for the five years through 2001, then a healthy pace, even as as strong evidence that November, evidence that
checked to see how they performed over the ensuing overseas economic weak- payrolls will exceed ex- home sales cooled off this
five years against the funds that had been in the bot- ness and the strong dollar pectations on Friday,” said winter after decent sales
tom 20 percent. have hit U.S. manufactur- Jim O’Sullivan, the chief gains earlier last year.
The researchers found only small differences in ensuing ing. Factories added just U.S. economist at High Fre- Those reports caused
success for the top and bottom funds in most catego- 2,000 jobs last month, ADP quency Economics. economists at JPMorgan
ries, as long as the time frame was longer than a year. said. Yet some economists The ADP survey covers only Chase to cut their forecast
“Even the best managers generally do not consistent- were skeptical of the fig- private businesses and fre- for growth in the October-
ly outperform,” the researchers wrote in their report. ure, because many com- quently diverges from the December quarter to an
“Those who lack the patience to stick with an active panies don’t drop laid-off government’s data. annual rate of 1 percent,
manager through multiyear rough patches may be workers from their payrolls ADP’s figures come after from 2 percent. q
better off in a low-cost index fund.”
S&P Dow Jones Indices, meanwhile, keeps its own Food price rise pushes China inflation up 1.6%
scorecard of how many mutual-fund managers are
able to stay in the top quartile or even top half of their BEIJING (AP) — China’s Consumer inflation had by 9.5 percent and fresh
categories. Its verdict: very few. consumer inflation edged been drifting down after vegetables went up 7.4
Of the 539 funds that ranked in the top half of large- up 1.6 percent in Decem- hitting 2 percent in August. percent.
company funds in the year through March 2011, 52 per- ber year on year as food Relatively low inflation has The year’s rise was well be-
cent repeated the feat the following year. That’s only prices rose, official data given Chinese leaders low the official target of 3
slightly better than a coin flip. showed this weekend. room to cut interest rates percent, and lower than 2
How many of those 539 funds were able to remain in The inflation rate reported six times since November percent growth in 2014.
the top half for five consecutive years? Less than 5 per- by the National Bureau of 2014 to stimulate the slow- Producer prices, measured
cent. Statistics was up from No- ing economy. as goods that leave the
The difficulty fund managers have in staying on top vember’s 1.5 percent and Saturday’s data showed factory, declined by 5.9
serves as a reminder to resist the temptation to hop was driven by a 1.5 percent that consumer prices were percent in December from
from one fad to another. Investors are notorious for increase in food prices. The up 1.4 percent in 2015 a year earlier,
chasing after whatever’s performing well and fleeing price of fresh vegetables compared with the previ- extending a long period of
whatever’s struggling. jumped 13.7 percent and ous year, also pushed by declines due to excess pro-
In other words, they often buy high and sell low, and it’s fresh fruits went up 2.3 per- higher food prices. Pork duction capacity in many
why investors often have worse returns than the funds cent. prices jumped year on year industries.q
they invest in do.
The largest actively managed stock fund, American
Funds’ Growth Fund of America, returned an annual-
ized 7.2 percent over the decade through 2015, for ex-
ample.
That’s how much investors would have made if they
bought at the start of that decade and then simply
held it. But most investors didn’t do that. Instead, many
bought more shares when performance was good and
sold when performance lagged. That means the aver-
age investor in the fund got a 5.3 percent annual return
over the decade, according to Morningstar.
Investors should also look to keep their fund expenses
low. A fund with high fees has to perform much better
just to match the performance of a low-fee fund. q