Here are the latest numbers on my mutual fund investments:
Eaton Vance Greater India :: -1.99%
Fidelity Capital Appreciation :: -0.23%
Fidelity Dividend Growth :: +3.08%
Fidelity China Region :: +5.02%
Fidelity Japan Smaller Companies :: +16.99%
Fidelity Latin America :: +34.51%
Fidelity Select Energy :: +9.69%
Fidelity Select Energy Service :: +32.55%
My average gain thus far has been +13.68%.
One note on the India fund: Eaton Vance had a 5.25% front end load. This is reflected in the -1.99%. Thus, the gain is actually positive if you ignore the front end load. I just say this to let you know that, Yes, it is trending upward. Normally, it is not wise to choose a fund with a load (front end or back end) because funds without loads have historically performed just as well as those without loads. However, I was (and still am) very excited about India’s economy. I searched and searched and the Eaton Vance fund was the only one I could find that concentrated on India.
Another note on Capital Appreciation fund, it did this on Friday:
That kind of 9% drop is the kind of thing that you just have to gut out. It would be incredibly foolish of me to sell my Capital Appreciation right now a mutual fund that has just dropped. A similar thing This happened with Energy and Energy Service a couple of months back. It has rebounded plus some. Let me please re-emphasize: Don’t try to time the market with mutual funds. (Unless you are a pro.) You will only get burned. The odds are that FDCAX the fund that dropped will rebound too.
My only reason for posting this is to encourage people, especially young people to save and invest. I have gained 13.68% in 6 months. Extrapolated that is 27.36% a year. If you contribute $250 a week and figure a 10% return (that is the average aggregate return of the stock market for many, many years) on investment, you will have $829,000 in 20 years. If you up that by $50 a week, you will have $995,000 after 20 years. Over a period of 30 years at $300 a week, that’s $2.9 million.
Update: Dad and I were suspicious that the surprise drop in FDCAX was for real. There was no major financial news and no apparent reason for it to drop. Dad called Fidelity this afternoon and found out that it was a distribution. Mutual Funds are required to, once a year, distribute all the capital gains and dividends earned in the past year. During the year, these profits (rise in share price and dividends) are figured into the mutual fund “share” price. The share price is not set by a separate market process, but is set by a formula taking into account the cash on hand and value of the stocks in the fund’s portfolio. Thus, with this big distribution to fund shareholders, the price obviously dropped by the percentage that the fund went up in the past year. When you set up your account, you can set whether you want them to reinvest the distributions or put them into your account as cash. I had the reinvest option selected.
Thanks to atthecrux, a financial guru who is (or was, I forget) majoring in financial planning, for helping me with some questions and concepts contained in the above paragraph.
At the same time he was on the phone with Fidelity, Dad got them to manually look up the cost information for all his mutual funds and input it into the website so that he could track his gains above cost basis. He was pleasantly surprised to see the figures. His best fund was one which he first bought in 1999: Fidelity Low Priced Stock which has a gain above cost basis of +184.18% over that 6-7 year period. That’s 26.31% annually. The fund that has the lowest gain above cost basis (I don’t have the time to figure out each fund’s annual gain above cost basis to get you the worst performing fund.) is Fidelity Select Energy Service which he bought in August of ‘05 and which has a 17.63% increase above cost basis.
Another important aspect of investment is diversification. I alluded to this above when I said that Dad had too many funds for me to figure out which has the lowest annual cost basis. He has a total of 19 funds spread across two traditional IRAs, a SEP-IRA and a Profit Sharing Keogh. I am under diversified right now and over-leveraged in energy funds. I could take a beating if energy tanked. However, when I started investing, I saw a golden opportunity in energy and jumped in with as much as I could pull together (not much on my salary!). It paid off, but I really need to diversify further. With every paycheck, I am working to do so. I’m not going to sell any of my positions, but I am exclusively adding funds (as the paychecks come in) which will diversify the composition of my portfolio.
Update #2: Here are some more investment figures: $50 a week at 10% gets you $165,000 in 20 years, $495,000 in 30 years, and $1.39 million in 40 years. $100 a week at 10% gets you $331,000 in 20 years, $991,000 in 30 years, $2.78 million in 40 years. You can do these calculations yourself at this simple investment calculator. Notice how much faster it grows toward the end? That’s why it’s so important to start early! $1 now will accomplish what $10 will in a couple of years.
–
I have written about my mutual fund investments in the past: Investments and Investments Update
I’m Not Emeril has a great post in which he does a bunch of calculations in AutoCAD (he’s an engineer) and figures out that the area of land in the ANWR that would be used for drilling purposes is equivalent to a tic-tac on a football field. Great research and great post!
