Index-fund advocate Doug Fabian has upped the ante with his "Lemon List" for Q4 of 2007. The newest version of the list consists of 2,212 mutual funds and over $1 trillion in assets during Q4, 2007. This represents a 9 percent increase over Fabian's Q3 2007 list.
Company Press Release
Doug Fabian, president of Fabian Wealth Strategies and editor of the Successful Investing newsletter, has just released his latest version of the infamous Lemon List, a scorecard exposing the worst-performing mutual funds. The new Fabian Lemon List consists of 2,212 mutual funds and over $1 trillion in assets during Q4, 2007. This quarter's Lemon List is the largest ever, with the total asset size of mutual funds making the list increasing 9% from the previous quarter.
Doug Fabian Fabian Wealth Strategies president
To put the most-recent quarter's data into context, consider that in Q3 the list represented $960 billion in underperforming assets. In Q4 the total asset size of all Lemon funds jumped markedly to $1.04 trillion.
"The real story here in the fourth quarter is the huge leap in the amount of assets that made it on to the Lemon List." said Doug Fabian. "It's proof once again that the mutual fund industry really is failing to protect the individual investor. I fear that given the current market decline, investors are in for a whole lot more lemons. The simple fact is that bad fund managers and bear markets constitute a lethal combination."
For a mutual fund to make it onto to Fabian's Lemon List, it must under perform its benchmark average for the past one year, three years and five years. By comparing funds to their benchmark category average Fabian is able to compare a specific fund's performance with that of its peer group. This apples-to-apples (or in this case, lemons-to-lemons) comparison makes the Lemon List a unique tool investors can use to see if their mutual funds measure up.
One way Fabian thinks investors can help turn their lemons into lemonade is to make the switch from mutual funds to low-cost, objectively managed exchange-traded funds, or ETFs.
"You would be much better served by transferring your lemon funds into low expense exchange-traded funds (ETFs), especially now that we are in grasp of the bear's claws," says Fabian.
Doug Fabian began publishing his Lemon List in 1998, but since its original publication the Lemon List has gone through a series of modifications to help it better reflect the current trends in the market. The latest Lemon List has been compiled by screening and comparing a universe of nearly 8,500 mutual funds.
The latest Lemon List also includes the 10 largest lemon funds, along with their performance data over the past one year, three years and five years. Each fund's category average performance is also listed, so investors can see just how poorly these 10 largest funds measure up to the average fund with the same objective.
The 10 largest lemon funds include a surprising list of familiar names whose assets total nearly $167 billion. (See also the attachment.) They are:
Fidelity VIP Equity Income (VPEAX)
T. Rowe Price Equity Income (PRFDX)
Fidelity Growth & Income (FGRIX)
Fidelity Blue Chip Growth (FBGRX)
Fidelity Dividend Growth (FDGFX)
Vanguard Windsor Fund (VWNDX)
American Funds New World A (NEWFX)
Van Kampen Comstock A (ACSTX)
Fidelity Investment Grade Bond (FBNDX)
Vanguard Asset Allocation (VAAPX)
The Lemon List also includes a complete list of mutual fund categories, along with their corresponding ETF alternatives.
Once a mutual fund advocate, Doug Fabian is now recommending exchange-traded funds to subscribers of his advisory services; for his managed accounts, and for his own personal accounts.
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