The Daily Dow
Monday, June 2, 1997
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (June 2, 1997) -- Exactly two years ago today, I published the results of a survey of mutual funds, comparing the industry to the S&P 500 Index, only to see dismal performance across the board. (See the Fribble "FUNDamentally Poor Performance.")

In the ensuing weeks, I was taken to task for unfairly lumping all mutual funds together, regardless of whether they were stock or bond funds, and the like. I still feel that it's a cop-out to claim that a bond fund shouldn't have to compete with stock funds. But that's another issue.

To update my older survey on the cheap as part of the research for my current book project with the Fool, I grabbed the February issue of Money magazine, "The 1997 Ultimate Guide to Mutual Funds." They break down the funds included in the survey by type, so I limited my test to stock funds, lest the forest be lost for the trees.

Money includes 2,787 funds, all of which have been in business at least one year, are available in at least 26 states, and accept investors with a minimum of $25,000 or less. Of those nearly 2,800 funds, only 580 of them have a ten-year track record -- the survivors, the long-termers, the best of the best?

Guess what? The performance, even focusing solely on stock funds, is dismal. Of those 580 funds, only 107 managed to beat the S&P 500 Index's 10-year annual average of 15.3%. A little math, 107 divided by 580 equals... ouch... 0.18 (or 18%). That's right, only 18% of the stock funds in business the longest have managed to stay ahead of the market itself.

I mentioned in an earlier column that only nine funds in this survey managed to beat the best 4-stock Dow Approaches during that period. In percentage terms then, the Dow Approach beats all but one-and-a-half percent of the stock funds in business over the last decade.

Does this mean the Dow Approach is the best approach to investing? Who knows? It's obviously not the only way to go. But it's certainly one of the easiest and beats the Wise about the head and ears with regularity. Still think those fund fees (which average 1.42% annually, incidentally) are worthwhile?

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________

Stock  Change   Last
--------------------
T    -1  1/8   35.63
GM   -   1/4   57.00
CHV  ---       70.13
MMM  -1        90.88

               Day   Month    Year
        FOOL-4   -1.40%  -1.40%  -0.98%
        DJIA     -0.57%  -0.57%  13.04%
        S&P 500  -0.23%  -0.23%  14.26%
        NASDAQ   +0.32%   0.32%   8.81%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  120 3M            83.00     90.88     9.49%
   1/2/97  153 Chevron       65.00     70.13     7.88%
   1/2/97  179 Gen. Motor    55.75     57.00     2.24%
   1/2/97  479 AT&T          41.75     35.63   -14.67%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  120 3M          9960.00  10905.00   $945.00
   1/2/97  153 Chevron     9945.00  10729.13   $784.13
   1/2/97  179 Gen. Motor  9979.25  10203.00   $223.75
   1/2/97  479 AT&T       19998.25  17064.38 -$2933.88


                             CASH    $609.53
                            TOTAL  $49511.03