Mutual Funds

Investors placing their bets for 2012 are faced with the classic dilemma: Stick with market sectors that performed best last year or search for value in beaten-down names? The question is especially tricky considering that 2011 was a turbulent ride of mixed economic news at home, worse news abroad and painful sell-offs that tested even seasoned traders. Investors' reaction was textbook -- dive into stock mutual funds stuffed with big, dividend-paying companies known for relative stability in good times and bad. That meant top-performing funds focused on utilities, consumer staples and healthcare companies.

SAN FRANCISCO - California has a friend who's about to write a hefty personal check that could help ease the state budget crunch. Mark Zuckerberg, the 27-year-old founder and chief executive of Facebook Inc., may have to pay the state $189 million in taxes after the Menlo Park, Calif., social networking company's initial public offering of stock in two weeks, according to calculations from PrivCo, which researches private companies. The IPO could value Facebook at $96 billion.

Manny Mashhoud has done well investing in U.S. stocks for two decades, but the Glendale insurance executive fears that the country's economy could be restrained for several years by high unemployment and the lingering trauma of the recession. So he's sharply boosting his investments in overseas markets and is even setting up a brokerage account so he can buy and sell stocks directly on foreign exchanges. "The advantages of the foreign markets substantially outweigh what we have here," Mashhoud said.

Howard B. Schow Manager of Vanguard mutual funds Howard B. Schow, 84, a well-regarded manager of Vanguard mutual funds such as the $30.1-billion Vanguard Primecap, died of natural causes April 8 at Huntington Hospital in Pasadena, said Joel P. Fried, president of Pasadena-based Primecap Management Co. A San Marino resident who was co-founder and chairman emeritus of Primecap Management, Schow — rhymes with "now" — managed...

This occasional column will evaluate funds that have stumbled and will consider the hardest question most investors face: whether to stay or go. * In the winter issue of its newsletter last year, the Lindner family of funds boasted: Lindner Dividend "Tops Morningstar National Rankings." "When Morningstar reported on the nation's highest . . . yielding hybrid funds as of November 30, 1998, the Lindner Dividend Fund led all funds in Morningstar's national database at 8.29%." True.

It looks like actively managed stock funds can't beat the market -- even when the market itself is struggling. More than four out of five actively managed U.S. stock funds trailed their underlying indexes in 2011, even though the stock market plodded through an uninspiring year, according to new research . An analysis by Standard & Poor's Corp. found that 84% of funds underperformed last year. That's even worse than their dismal showings in the recent past. Over the last three years, 57% of funds trailed their indexes.

Mutual fund investors should always take note of what investing fees they're being charged, particularly in this tough investing climate. Transactions: The costs associated with an individual investor's transactions and account are listed in a fee table, located near the front of a fund's prospectus, under the heading "Shareholder Fees." They include: * Sales loads: A fee charged to compensate the brokers.

Exchange-traded mutual funds that use risky strategies in pursuit of outsized returns are not making the stock market more volatile, according to a study by Morningstar Inc. The report argues that so-called leveraged ETFs, which attempt to magnify underlying moves in stock prices, have had little effect on the market's heightened volatility in the last few years. Instead, the study says, fundamental factors such as corporate earnings play a far bigger role. The fund-tracking firm is walking a fine line of sorts in its report.

Average total return, including dividends, in percent for periods ended Thursday, Oct. 11. Category (No. of funds) Week Year-to-date 12 months International: foreign +0.65% -11.1% -5.1% stocks only (56) Utilities (15) -1.14 -8.2 -3.1 Global: U.S. and foreign -1.23 -12.5 -9.5 stocks (42) Fixed income (535) -1.25 +0.2 +1.4 Balanced: stock and bond (60) -3.12 -7.8 -7.8 Equity income (66) -3.80 -13.7 -14.1 Natural resources (19) -4.36 -6.6 -1.2 Health/biotechnology (9) -4.46 +1.0 +3.

DoubleLine Capital, formed by star bond fund manager Jeffrey Gundlach after he was fired by L.A. money management firm TCW Group last month, on Tuesday registered to launch its first three mutual funds for individual investors. Gundlach, who is in a vicious legal battle with TCW, hopes to lure investors from the TCW funds he had managed for the last decade, including TCW's retail flagship, Total Return Bond fund. In a filing with the Securities and Exchange Commission, DoubleLine applied to launch its own Total Return Bond fund, which like TCW Total Return Bond would invest primarily in mortgage-backed bonds.

It looks like actively managed stock funds can't beat the market -- even when the market itself is struggling. More than four out of five actively managed U.S. stock funds trailed their underlying indexes in 2011, even though the stock market plodded through an uninspiring year, according to new research . An analysis by Standard & Poor's Corp. found that 84% of funds underperformed last year. That's even worse than their dismal showings in the recent past. Over the last three years, 57% of funds trailed their indexes.

Exchange-traded mutual funds that use risky strategies in pursuit of outsized returns are not making the stock market more volatile, according to a study by Morningstar Inc. The report argues that so-called leveraged ETFs, which attempt to magnify underlying moves in stock prices, have had little effect on the market's heightened volatility in the last few years. Instead, the study says, fundamental factors such as corporate earnings play a far bigger role. The fund-tracking firm is walking a fine line of sorts in its report.

Even the most respected mind in the bond world is going into the new year with a good dose of humility. Bill Gross, Pimco's famed bond guru, made a big public bet last year that U.S. Treasury bonds would fall in value. When the opposite happened, 2011 saw customers flow out of Pimco's flagship bond fund for the first time ever, according to data firm Lipper Inc. Gross apologized to customers. And in a letter written last week, he reversed course and called Treasuries a smart investment for 2012.

Investors placing their bets for 2012 are faced with the classic dilemma: Stick with market sectors that performed best last year or search for value in beaten-down names? The question is especially tricky considering that 2011 was a turbulent ride of mixed economic news at home, worse news abroad and painful sell-offs that tested even seasoned traders. Investors' reaction was textbook -- dive into stock mutual funds stuffed with big, dividend-paying companies known for relative stability in good times and bad. That meant top-performing funds focused on utilities, consumer staples and healthcare companies.

The Securities and Exchange Commission will soon propose rules for revamping money-market mutual funds, pushing the options of a floating net asset value and capital buffers, SEC Chairwoman Mary Schapiro said. "Money-market funds, while perhaps not the cause of the downward spiral of events, certainly exacerbated the financial breakdown," Schapiro said Monday in remarks prepared for a Securities Industry and Financial Markets Assn. conference in New York. The SEC is pursuing "further structural reform" in the $2.6-trillion industry, she said.

Popular outrage forced Bank of America Corp. to drop the idea of a $5-a-month debit card fee. Now imagine what that outrage could achieve if it were let loose across the financial industry. How many mutual funds, if faced with that kind of people-power backlash, could justify the management and marketing fees they're charging investors? How many banks would find their deposits running out the door if savers really took the time to shop around for the best rates? How many company 401(k)

The number of U.S. households owning mutual funds fell for the first time in 15 years in the 12 months ended in May, amid the longest stock decline since the Great Depression. About 54.2 million households, or 50% of those in the U.S., owned mutual funds in May 2002, according to the Investment Company Institute, the industry's trade group. That's 3.7% less than a year earlier. The number of households owning funds doubled in less than 10 years from 25.8 million, or 27% of the country, in 1992.

The U.S. stock market in 2006 had its best year since 2003, but it was a challenging year for many stock mutual funds. The Times' annual fund review will appear in the Business section Monday. It will include tables showing how 5,400 stock and bond funds performed in the fourth quarter, all of 2006, and the last three years, and listings of the top-performing funds for the year in more than 50 major categories. The report also will include articles providing review and outlook.

Question: I am a customer and shareholder in Home Depot Inc. Despite the economy, are there good prospects ahead? Answer: The results of the world's largest home-improvement retailer are tied to consumers' willingness to buy for their homes and to the company's operating efficiency. The question for stock investors is whether both factors will be strong enough to provide robust returns. Despite a sales drop in its fiscal first quarter, which ended May 1, net income rose 12% to $812 million as costs fell, profit margins went up and the company bought back its shares.

Predicting the best and worst stock mutual fund sectors in the first half of this year looked too easy, in hindsight: You just needed to flip last year's best and worst. Healthcare stocks, last year's weakest domestic industry sector, charged to the top of the charts in the second quarter and first half of this year. Funds focused on health and biotech issues rose 14.8% in the half, on average, after lagging behind the rest of the market with an 8.2% average gain in 2010, according to Lipper Inc. At the bottom of the performance lists for the quarter and half were precious metals funds, which typically own shares of gold and silver mining firms.