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Why Your Mutual Fund Stinks

By Stansberry Research Interview Series
Wednesday, November 7, 2007

All around us, other countries' stock markets are making investors rich.
 
From October 2002 through March 2006, the U.S. stock market returned roughly 59%. That's a fantastic return, equal to average annual gains of 14%. The U.S. must have blown away its global competition, right?
 
Wrong. Out of 25 world indexes, the U.S. came in 23rd.
 
Not once in the last 27 years has the U.S. market produced the highest returns of any global market. Of course, some booming markets are volatile, corrupt wastelands, void of any serious accounting... Consider China: The Shanghai Composite Index is up 225%, but companies are not required to disclose their debt.
 
Still, the biggest opportunities for investors right now lie outside of the U.S. And by playing it safe and focusing on countries with sound accounting principles, you can make an absolute fortune.
 
For the passive investor, a good way to start is to find an internationally focused mutual fund that's managed by an exceptional investor, one that's been around for a long time... A mutual fund like the Oppenheimer Global Opportunities Fund.
 
Global Opportunities is a "go anywhere" fund, meaning it can invest in any country, in any asset class. Now when you consider any mutual fund, you need to look for three qualities:
 
1. Low fees
2. A manager that's been around for at least 10 years
3. Large personal holdings on the part of management
 
Global Opportunities has A shares, B shares, C shares, N shares, and Y shares. The C shares (OGICX) are the most attractive from a fee standpoint: They have no load fees. And operating fees are only 1.8%.
 
The A and B shares both feature fees of 5% either up front or if you sell your holdings anytime in the first six years.
 
It's important to find a manager who's been involved in international investing for at least 10 years. Emerging markets have soared in the last five years. You could have picked virtually any market and made a killing.
 
Global Opportunities is managed by Frank Jennings. Jennings has been managing money since 1960. The man is no slouch. Since its inception (December 1993), OGICX has returned average annual gains of 13.8%. At this rate, your money doubles every six years.
 
As of September 30, mutual-fund tracking service Lipper ranks Global Opportunities second out of 17 global "flexible portfolio" funds.
 
And Jennings puts his own money alongside his investors' – nearly $1 million worth.
 
The fund's top five holdings are:
 
Company
Industry
% of Holdings
Advanced Micro Devices
semiconductors
7.7
Bombardier
aerospace
3.4
Cree
semiconductor equip
3.3
NicOx SA
biotechnology
3.2
ABB
electrical equip
2.7
 
Jennings has about 50% of the fund in U.S. companies that benefit from global growth, with a good chunk of it in the technology sector (he owns eBay, Rambus, and JDS Uniphase). He also has large weightings in drug companies, electrical infrastructure, and aerospace.
 
If you're bullish on these sectors, this may be the fund for you.
 
Good trading,
 
Graham




Recent Articles
Market Notes
Inflation! U.S. Oil Fund, streetTRACKS Gold, and iShares Silver at all-time highs.
 
Resource-rich Canada follows suit... iShares Canada, Canadian Natural Resources, Petro-Canada, and CurrencyShares Canadian Dollar at new highs.
 
World's largest "water stock," Veolia Environnement, at all-time high... up 375% in the past four years.
 
Consumer stocks plunging...
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
Change
52-Wk
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%