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Fund Spy

The Most Popular and Most Shunned Funds of 2010

A closer look at how these funds have performed and their future prospects.

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Investors might have been hoping for more calm in the equity markets in 2010 after a steep decline in 2008 and early 2009, followed by a huge rally. But it's been yet another turbulent year for stocks so far. Equities dropped a bit early on, then staged a rally led by much of the same cyclical fare that soared in 2009 before staging a sharp reversal when the government-debt situation turned out to be more dire than feared. Because we're already nearing the first-half point in 2010 and the market averages have been all over the place, we decided to take a closer look at the funds investors have been flocking to and those they've been fleeing. (See my colleague Karen Dolan's piece on dollar-weighted returns and the costs of chasing performance.) We included bond funds, too--although bond markets generally haven't seen a repeat of the turbulence of 2008-09, bond funds' flows are clearly affected by investors' sentiments about stock funds.

The Top Five
 PIMCO Total Return (PTTAX)
2010 inflows: $18.6 billion (All figures are through the end of May.)

The overwhelming leader in net flows this year is a bond fund whose manager, Bill Gross, stated earlier this year that bonds have seen their best days. It's also worth noting that four of the five funds that have received the most money from investors are bond funds. Nevertheless, this fund's A shares have gained nearly 4% for the year to date through June 9, 2010 (slightly outpacing both the Barclays Capital U.S. Aggregate Bond Index and the intermediate-bond category norm), while stocks (as represented by the S&P 500 Index) are down 2%. Investors should keep their expectations for bond returns in check; this fund, for example, recently sported a modest yield of 3.88%. But even so, it's difficult to bet against Gross and his team.

Greg Carlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.