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Fund Spy

Should You Buy These Reopened Funds?

Evaluating the prospects of Vanguard Dividend Growth and three other recently reopened funds.

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As a contrarian, I am more interested in getting funds that are reopening than those that are about to close. That's because funds generally reopen when performance is cool and shut when it's hot. I prefer to buy low and sell high, hence the bias toward reopening.

Generally, funds reopen at a time when they are in outflows and management believes that the fund has either shrunk to the point where it can handle more money, or it is suffering so many outflows that it would like some inflows to at least slow down the rate of outflows. A third option is when a fund was originally closed owing to concerns about hot money rather than overall capacity size, and it reopens when things have cooled off.

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

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