10 Hottest Mutual Funds in 2008

Check out these hot mutual funds ranked by net cash inflows by Morningstar. But a hot fund may not be a good fund for your portfolio.

Last week, Morningstar, the fund research firm, published a list of 10 mutual funds with highest net inflows in the first half of 2008. Given how much the stocks have been down since the credit crunch began last summer, it’s pretty amazing that some funds can still take billions of dollars from investor seeking returns of their money. However, a hot fund isn’t necessarily a safe fund (in terms of return of course), as noted in the article. Indeed, among the 10 hottest funds, all 8 equity funds are losing money in 2008 with 6 of them having negative double-digit return so far. The other two funds, both bond funds, barely stay above the water.

The following is the list of the funds together with some key stats:

1. PIMCO Total Return Institutional [[PTTRX]]: Net inflows of $14 billion, YTD Return 1.89%, Yield 5.12%, Expense Ratio 0.43%
2. Vanguard Total Stock Market Index [[VTSMX]]: Net inflows of $9 billion, YTD Return -12.99%, Yield 2.00%, Expense Ratio 0.15%
3. Ivy Asset Strategy A [[WASAX]]: Inflows $6.8 billion, YTD Return -4.76%, Yield 0.43%, Expense Ratio 1.12%, Front Load 5.75%
4. Vanguard Total Bond Index [[VBMFX]]: Inflows of $6.2 billion, YTD Return 0.77%, Yield 4.91%, Expense Ratio 0.19%
5. BlackRock Global Allocation [[MDLOX]]: Inflows of $6.2 billion, YTD Return -5.97%, Yield 2.83%, Expense Ratio 1.18%, Front Load 5.25%
6. American Funds: Inflows between $4 billion and $4.9 billion. Capital World Growth & Income (CWGIX), YTD Return -13.39%, Yield 2.75%, Expense Ratio 0.69%, Front Load 5.75%
7. American Funds Growth Fund of America [[AGTHX]], YTD Return -11.58%, Yield 1.06%, Expense Ratio 0.61%, Front Load 5.75%
8. American Funds Fundamental Investors [[ANCFX]], YTD Return -12.52%, Yield 2.31%, Expense Ratio 0.58%, Front Load 5.75%
9. American Funds Capital Income Builder [[CAIBX]], YTD Return -10.71%, Yield 4.42%, Expense Ratio 0.58%, Front Load 5.75%
10. Harbor International [[HAINX]]: Inflows of $3.9 billion, YTD Return -13.54%, Yield 1.53%, Expense Ratio 0.83%

When looking at this list, what really surprises me isn’t the performance, but half of the funds that made to the list are actually load funds! Well, I never bought any load fund myself and somehow find it’s hard to understand the reason of buying fund with 5.75% frond load. For me, when it comes to buying mutual funds, the cheaper (low ER), the better (check out how I use Morningstar to research mutual funds). And when a load fund is losing money at the same magnitude as, for example, Vanguard Total Stock Market Index Fund is, it’s hard to justify the front load it charges!

Are you a load fund investor?

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