With the boom in real estate investment trusts and energy stocks, it would stand to reason that an investor in a fund specializing in either sector would be sitting pretty. But contrary to reason, that isn't always the case, The Wall Street Journal reports.
Although mutual funds may be classified as part of the same group, some actually don't invest in regular stocks but in instruments that act differently than equities, such as bonds, preferred stock or derivatives. Or they may concentrate on dividend yields rather than returns.
Further, even contrarian funds that bet against an increase in a sector get lumped into the category. And sometimes, they are clones of older, successful funds that aren't able to replicate their predecessor's success.
One utilities fund that hasn't done as well as its peers is the Putnam Utilities Growth and Income Fund. It is up 8.7% through Jan. 26 so far this year, trailing its category by 4.8 percentage points, according to Morningstar. Similarly, among real estate funds, the Kensington Select Income Fund has returned negative 2% so far this year, trailing its peers by 13.6 percentage points.
However, sometimes these funds have a legitimate place in an investor's portfolio, as a way of hedging or diversifying their holdings.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.