Growth investing is back.
Although they suffered the most during the protracted bear market, growth funds have outpaced their value-oriented counterparts so far in 2003. Size has been a determinant of success, too--small- and mid-cap stocks are generally trumping larger stocks again this year--but within each market-cap range, more speculative fare is coming on strong.
Given growth’s relative success, many investors may be looking to reposition portfolios that turned defensive during the downturn. Nothing is wrong with rebalancing; we encourage it, in fact. Having both growth and value fare helps ensure that as the market’s pendulum swings back and forth between the two styles, your portfolio provides a smoother ride.
But don't chase performance. A stylistic tailwind can dissipate quickly, after all, and a hot category can cool faster than you can say “irrational exuberance.” But now that the stock market’s rally has vaulted growth funds toward the top of the heap, how should a growth-deprived investor proceed?
Good question. And with the help of our Premium Fund Screener
, we’ll try to provide some answers.
With this week’s screen, we’ll narrow the vast universe of growth-oriented funds down to those diversified domestic offerings that have stood the test of time, holding up well through both bull and bear markets. As always, we’ll look for just those offerings whose expense ratios are lower than their typical peers’. We’ll also ensure that the management team responsible for each fund’s performance record is still in charge and that the initial investment minimum isn’t prohibitive. Moreover, because growth funds can sometimes give shareholders a bumpy ride, we’ll also look for offerings that have been less volatile than their average peers.
to run this screen yourself.
And there you have it--a relatively compact list of growth offerings that you should feel comfortable owning through thick and thin. We didn’t filter for capitalization, but tweaking the screen for that is easy enough. Just click the back button below the search results and modify the criteria until they suit your goals and risk tolerance. And be sure to save the screen for future reference by using the "Save Criteria" button in the bottom-right of the results screen. The lineup will likely change a bit over time.
Meanwhile, analysis highlights for some of the funds that made the grade appear below. Happy hunting! American Funds Amcap (AMCPX)
This fund invests in proven growth companies of any size. The portfolio is spread out across sectors and stocks, and it typically sports a hefty cash stake. As a result, the fund has lagged a bit during go-go growth rallies, but its overall risk/return profile is quite attractive. Thus, growth investors with a moderate risk profile will likely feel at home here. Neuberger Berman Fasciano (NBFSX)
Patient investors have been rewarded with this fund. It invests in proven companies and stays away from momentum stocks, a strategy that has paid off in the long run. This fund would make a good complement to a large-cap offering heavy in technology stocks. Meridian Growth (MERDX)
This fund wants to have its cake and eat it, too. Management looks for rapidly growing small- and mid-cap companies, but it isn't very willing to pay up for that growth. That approach doesn't always lead to chart-topping performances, but it has led to mild volatility and solid long-term returns.