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Show ee ___ TheSalt Lake Tribune BUSINESS Sunday, June 20, 1999 E3 war Stock and Bond Funds Come Back —oney see vor ELeaSee Into Fashion in Financial Circles Despi pite -chip growth grow stocks cks have done well for investors theiririimage as stodgy,/ blue-chip CHARLES A. JAFFE BY CHETCURR During that stretch, small-growth stocks, small value stocks, foreign stocks and bonds have taken a stock market in the second half of the 1990s, bluechip growth stocks and the mutual fundsthatinvest Chan e 6} ers = light than any other category of stocks in the past 20 years. 5 piece NEW YORK — Until they becamethe stars of the Russell Index turn or twoleading the performanceparade. If the big blue chips areto keeptheir hold on the top spot in them suffered from a stodgy image 8 they will have to break a long-standing pattern of Sure,these stocks represented top-quality compa- rotation». nies — GeneralElectric, Coca-Cola, Merck and so on Theory Lesson ‘The Russell 2000 Indexis about to provide investors with ~hange. ‘All ma:kets tend to revert to the mean,” said ie pyeloe ay knew coerthine about ion i SEG a ey were too big to grow asfast Richard Weis portfolio manager of the Strong ete Stock and Strong Opportunity funds in Mil AsPeter Lynch, vice chairman of Fidelity Man- Whenthe financial consulting firmofCallan Asso: agement & Research in Boston, put it at a recent ciates Inc studied the record of seven indices mea aninteresting look at an ageold question: Should a let your winners run,or do you re- Investment Company Institute conference: “Small companies usually have big moves. and big companies usually have small moves. It’s very hard for suring different sectors of the marketsin the past 20 year‘ it fond that large growth stocks (represented byti» S&P-Barra 500 Growth Index) occupied the balance a portfolio to stay true to your asset allocation? That an index would provide large companiesto accelerate their growth rate.” So it’s a remarkable thing that an index of biggrowth stocks outperformed all other categories of No.1! on the finish.’ 1 only once, in 1989, before they embarked 1 scent four-year winning streak. That index p»xt-to-last and last. respectively, in 1992 Date lor's survey 0 as, Mortgages are co jue. Car loans arefor $9.000, 20 perce Personal loans are for $3,000 24-month Mortgages 30-year 15-year AaM r ne iS Weer svi G9 ai 2 Fee ee unse Others Car Personai nee rar Glo BES eee ‘ : eke) CRs kes ed EE) hei =Ayerage has changed {rom:afixes) rate card to-a variable ta Bank deposit yields Bank Rate Monitor's weekly Survey of the 10 larg in the 10 largest metro are MMDA‘ 641 months t-year 2-1/2-year sto 5-year ; eet if Money: Markel Dancer Apeounts moneyfunds Mey gest money funds Here are the 15 biggest money-market mutual funds open t Individuals withtheir current y annualized yields anylessonin portfolio manage- stocks from 1995 through 1998. Imagine a gang of it’s a byproduct of the index stars or sweeping the MTV Awards. Asthis story has developed, so has a widely accepted explanation for howit cameto pass. With capitalism taking root in many newplaces around the and 1/84, with the LehmanBrothers aggregate bond inde lead ny the pack in 1982 and 1984 Tenit becameinternational stocks’ turnto shine. took ic , honors in four of the six years between 1979 Merrill Lynch cae ‘Money Fund 443° 46 worth examining further. The Russell 2000is the bestknown benchmarkfor “smallcap” stocks, issues in which the market value of the company — theshare price multiplied by the total number of shares — is in the neighborhood of $1.3 billion. Each year on July 1, the Russell is “repositioned,” meaning Schwab Money Market Fund Schwab Value Advantage MF Centennial Money Market Trust MorgStan DeanWitLiquid Asset Dean Witter/Active Assets MT Merrill Lynch Retirement Res. MF PaineWebber RMA MF/MM Port Prudential/Command Money Fund Alliance Capital Reserv: Stagecoach MoneyMarket Fund Fidelity Spartan MMF 4.99) 169: 1 new-economystory provides no assurance whatever that blue-chip growth stocks will stay on top. Stock Morgan Stanley Capital International's Europe, Australia and Far East Index, or EAFE, rankedfirst in 1925, '86 and '87, and again in 1993 and ‘94. Small —-v.iue stocks set the pace in 1988 and ‘92; small growth stocks in 1991, and bonds in 1990 Jay Kloepfer, Callan’s director of capital markets research, noted that the strength of growth blue chips since 1995 “has left many investors and money managers questioning the value of diversification Manyinvestors have begun to losepatience with un derperforming asset cla: 4.27 463) 433 439° those companies that have done well and have grown to the world, creating an increasingly global environment, the blue-chip companies had the size and the strength to prosper most. Big multinationals could spend the money necessary to conquer new markets in distant places, while smaller companies lacked the capital, the expertise or the contacts to keep up. “Large-cap growth companies are glamorous fora reason,’ said Tim Ghriskey, senior equity portfoli: managerat the Dreyfus Corp. in NewYork. To some students of financial history, though, the point that they exceed the threshold, graduate into Russell’s large-cap index, the Russell 1000. Other stocks that performancehas always gone in cycles, and the blue chips have already enjoyed a longer time inthe lime- class hashistorically persisted at one relative ranking longer than four years. ment decisions is strange, but and 1 *‘)’ before climbing to No. 2 in 1994 &=" new 50-year-olds suddenly becoming pro basketball all- process that most investors neyer see. And the current changes are so dramatic that they are eae Indie’. of small-companygrowth and valuestocks Butafter a look at the 20-year record, Kloepfer says, “persistence seemsunlikely. No single asset This Fund(ranked by size) weak Smith BameyCash Ponicinsen Vanguard MMPVPrime Pont Fidelity Cash Reserves eet eek a RiOe Bad 437 461 4.56 469 4 4.56° Avg. taxable money fund Tax-free funds i 4.29% 2.51% 4.56% 2.60% jource Money Fund Ret CONVENTION CALENDAR drop off the Russell 2000, to be replaced by up-and-comers. THE UNIVERSITY OF UTAH It’s a process that makes the Russell 2000 different from di manybetter-knownindices. eaeee Andit's importantthis year be- _ Planned Where Sunday Citywide and replacing them largely with no-name widget manufacturers. ‘American Academyof Hospice & The departing companies Runs Attends rr Thrmgh 2.400 By 400 Sune Salt Palace & citywide 2.700 June 29 Quality fan Center Saturday 0 2 Monday Snowbird Resort A PROGRAM FOR THE WORKING PROFESSIONAL 7 7. can comfortably say that this has been the Palliative Medicine provided the Russell 2000 with lotof its modest growth in the past year and were a major Unitarian Universalist reason whythe index — nor: mally considered oneof the easier ones for a fund manager Association best experiencein my life, its value far exceed. Tuesday ing any educational programI have entered to beat — was knocking the stuffing out of so many small companystock funds. Internet stocks makeup nearly 8 percent of the index today; they will be less than 2 Betty Cox Seminars percent come July. And while Antiques Fair the newcomers arelikely to in hardly are proven winners In short,it is the most radical shift in the index that anyone Salt Palace clude Netstocks, the new firms June 27 ie ee | tions, plus an answerto that let-the-winners-runquestion buried in the change Forstarters, index funds | based on the Russell 2000 are Salt Lake Tribune reportersare doing research ox personal vankruptey and are looking for readers = of your filing? What might have dune difierenthy . Please tact Lisa Carr before. during ard after havin filed bankruptcy pctitions. What mad: 1 choose bank- com or write care of Th Lake Triti.ne Business Desk § Main St, Salt Lake City willing 1 share their experiences ruptey? What happened as aresult going to have a tax event asso ciated witn ail of the changes. tor, (Bi For complete details telephone 801-581-5577. www. business.utah /exed 2 F DAVID 84111 Normally, index funds are tax efficient, meaning they buy and on CO tbFade... winners must be sold (losers. too, which may offset some of the gains) and taxes incurred. any Russell-tied index fund Supported By Over 70 But when an index changes. nestor Bi ! hold stocks for the long term. avoiding capital gains | | ECCLES , SCHOOL OF BUSINESS Utah Valley 466-6122 | | 2880 S. Main St., #117 1-800-619-SAVE (26 4 stocks in the index to stay true Mails “Yi Th Tuesday, July 13 Member SIPC * Est. 1980 eliminates overlap in theindex es. Overlap. as any regular reader of this column knows, often makes a fund portfolio perform below expectations. making it morevolatile andless diversified. Yet most investors havetrou blepulling back on winners and reallocating funds to less suc cessful portions of the market ST BYPRESS “XTRA” Pa For aninvestor with a game plan, who has decided where they want their money to go and how they wantto gain ex posure (6 different assets. repo sitionirig Is important.” says Gus Sauter, managing director at the Vanguard Group Yes, change can create short-term distortions in the in dex, but tf the index stays pure | 3 MONTHS *Air Time pectations, it proves the point of rebalancing “The short-termpain that Answer + Voice Mail Jes *Custom from repositioningis important than sticki ait your wae investmentstrat et rates with egy . ~ , “No Activation Peas You are always better off stick ing with the plan Chdftts A. Jaffe is mutual funds columnist at The Bos ton Globe. He can be reached by e-ridil at jaffe@globe.com PAGER No Deposit satis aware ; Tes 533-1111 #1171 So. West Temple or at The Boston Globe, B 2378. Boston, MA 02107 2378 COPY ny may come | ; ‘ ’ ertising deadline Wednesday, July > Call 237- BN meed ani $5. $2 200 Minima equity to their mandate, others will hold a stock as long asit’s in the index Staying style-pure, therefore and performs to long-term ex ¢ Offices Nationwide. must make these changes July had alreadysold offthe biggest months withoutcareerinterruption. fae Did You Declare Bankruptcy? Contact The Tribune can recall, even if it r nothing more than routine maintenance Thereare several implica 1, and there will be taxes Next, many active managers will follow suit. While some Earn an accredited graduate degree in 21 Source: Salt Lake Convention & Visitors Bureau ° |
