Four out of the top 10 largest mutual funds on Doug Fabian’s
Lemon List for the first quarter were from
Fidelity Investments.
The list, released yesterday, includes 2,335 mutual funds with assets of $718 billion that are considered lemons by Mr. Fabian, president of Fabian Wealth Strategies of Costa Mesa, Calif., and editor of the Making Money Alert and Successful Investing newsletters.
To make the list, a fund must underperform its peer group average by assets for the last 12 months and for the last three- and five-year periods.
The benchmarks are based on data and peer group definitions from New York-based Lipper Inc., according to Mr. Fabian.
“It’s three strikes, and you’re on,” he said. “The first quarter saw a little bit of recovery. There were 200 [fewer] funds on the list, compared to the end of 2008.”
More than 30% of the funds, or 730, had negative annualized returns over the past 10 years, the study found.
Topping the list was the $25.3 billion Dodge & Cox Stock Fund (DODGX), offered by San Francisco-based Dodge & Cox. The fund lost 45.2% over one year, 18.36% for the three-year period and 6.58% for the five-year period.
The Fidelity funds that made the top 10 were: $15 billion Fidelity Magellan Fund (FMAGX), $12.7 billion Fidelity Equity-Income Fund (FEQIX), $8.9 billion Fidelity Freedom 2010 Fund (FFCX) and the $8.5 billion Fidelity Investment Grade Bond Fund (FBNDX).
"We take a long-term approach to investing," said Fidelity spokesman Alexi Maravel.
"Our goals have always been to provide shareholders with very competitive performance over the long-term, coupled with below-average expenses. We believe we have accomplished that over time."
He pointed out that the Fidelity Magellan Fund had a return of 8.72% year-to-date as of April 27.
Also on the list were: the $22.6 billion
American Funds Bond Fund of America (ABNDX), which is advised by Los Angeles-based Capital Research and Management Co.; the $13.4 billion Davis NY Venture Fund (NYVTX), offered by Davis Selected Advisers LP of Tucson, Ariz.; the $12 billion Dodge & Cox Balanced Fund (DODBX); the $9.7 billion
T. Rowe Price Equity Income Fund (PRFDX), offered by Baltimore-based
T. Rowe Price Group Inc.; and the $8.9 billion Franklin Income Fund (FCISX), offered by Franklin Resources Inc. of San Mateo, Calif.
"Obviously 2008 was a disappointing year and that year has had an impact on our results," said
American Funds spokesman Chuck Freadhoff.
"If you look over a longer period of time, a period that includes numerous market cycles, Bond Fund of America has produced an average annual total return of 8.2% which is very respectable. Investors usually invest in bond funds for income. Even in 2008, investors in Bond Fund of America had an income return of 5.9%."
The other funds mentioned were not immediately available for comment.
