Growth funds were the top performers in the first quarter of 2016. Moreover, nine of the top 10 performing funds over the last decade were in the growth category.
Investors should prioritize between dividends or growth investing based on risk and portfolio construction. One advantage of income investing is it provides regular income to pay bills and provides opportunities to reinvest and generate compound returns. However, the returns on income investing are usually smaller than the gains seen with growth investing. Although growth investing brings higher risk, for the long-term investor growth stocks can make a large impact.
According to Morningstar, large-cap growth mutual funds outperformed other categories for the first quarter. Given information technology was the leading sector in the S&P 500, it is not surprising the top performing funds “had substantial weightings in technology stocks, ranging from 30% to a whopping 48% and placed big bets, holding fewer than 35 companies each.”
Capital Group, an investment company with more than $1.5tn of assets under management and manager of the American Funds, is fighting back against the trend towards passive investing. Capital launched an aggressive marketing strategy and introduced “clean shares” which only includes Capital’s own management fee and no distribution fees. Capital is also hoping the volatile market “will be kinder to active asset managers.”
Looking at returns after the close of the first quarter reveal the market is reassessing its post-election reaction. “Large-cap, growth stocks like technology companies once again are beating their small-cap and value counterparts.” Changing fiscal policy and the risk of a trade war “remains the biggest risk that could ‘blow a hole’ in people’s portfolios.”
This article reviews the best U.S. equities funds from 2006-2015 based on different categories. It looks at 1-, 3-. 5- and 10-year periods using the S&P 500 as a benchmark. Nine of the top 10 performing funds over the last decade were growth funds.
Article by by Anna Sachar, Advisor Perspective