Fund Fallout
A nightmare year for most investors ends on a promising note
If you want to know what a miserable investing year 2002 was, consider this: Even Morningstar's domestic stock fund manager of the year lost money. Joel Tillinghast's Fidelity Low-Priced Stock fund fell more than 6 percent. But given that his peers lost more than 16 percent on average, it's viewed as a moral victory.
Those were about the only triumphs in 2002, which marked the third straight market downturn and the third consecutive year that you were better off in bonds. That hasn't happened since the Depression years of 1939-1941. The average U.S. stock fund lost nearly a quarter of its value in 2002. Technology and telecommunications funds fared even worse, plummeting 43 percent and 41 percent, respectively.
With uncertainty the only certainty in the market, and with the threat of war in Iraq, all that has glittered recently has indeed been gold. The average fund that invests in gold and gold-mining stocks soared 63 percent last year, as the precious metal jumped above $340 an ounce. Investors who flocked to other classic havens were also rewarded. Long-term government bond funds delivered total returns of more than 13 percent while intermediate-term bond funds rose about 8 percent last year. Meanwhile, real-estate funds, with their fat yields, also gave investors a lift, returning more than 4 percent.
There was promise in the fourth quarter. Despite a disappointing December, the average diversified stock fund rose 6 percent in the final quarter, providing some hope that the long national financial nightmare might finally be over.
This story appears in the January 20, 2003 print edition of U.S. News & World Report.
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