Green Investing Risks
Lloyd Kurtz, a portfolio manager with Nelson Capital Management in Palo Alto, Calif., whose job involves aligning clients’ social ideology with their portfolios, warns against confusing dreams for a greener tomorrow with economic realities. Although they may offer upsides for the environment, a sharp drop in oil prices could quickly dampen the earnings prospects for many of these newly created green energy companies.
Kurtz also warns about pinning too many hopes and dollars on any one company’s prospects. "Remember all the [once-hot software companies] of 1985? Basically only Microsoft is left today. Don’t buy only one wind company, or one solar company. Buy them in bundles either through mutual funds or ETFs. Otherwise, there is just too much risk in the game," says Kurtz.
10 Best Mutual Funds
There are now more than 7,000 mutual funds and fewer than 25% of them outperform the S&P 500 in the long run.
These are the 10 best-performing mutual funds of the past 10 years.
|
Fund |
10-Year |
|---|---|
|
Wasatch Micro Cap (WMICX) |
24.8% |
|
Kinetics Internet (WWWFX) |
23.0% |
|
Bjurman, Barry Micro-Cap |
22.9% |
|
Bridgeway Ultra-Small |
22.7% |
|
FMI Focus (FMIOX) |
21.0% |
|
Bruce (BRUFX) |
20.9% |
|
CGM Realty (CGMRX) |
20.7% |
|
Bridgeway Aggressive |
20.4% |
|
T. Rowe Price |
19.3% |
|
Quaker Strategic Growth (QUAGX) |
18.9% |
*Ended April 30, 2007. Data from Morningstar; includes only domestic stock funds.
The best funds of the past 10 years had, on average, longer-tenured managers and charged less to manage your money.
Role of Old-School Ties in Mutual Fund Returns
A new study titled "The Small World of Investing: Board Connections And Mutual Fund Returns", distributed by the National Bureau of Economic Research, suggest that old-school ties play a part in the world of mutual funds and hedge funds investing and profitability.
The study states that mutual fund managers invest more money in companies that are run by people with whom they went to college or graduate school compared to companies whom they have no such connections. Investments involving school ties, on average, also do much better than other investments.
“It’s a very good paper,” said Michael S. Weisbach, a finance professor at the University of Illinois. “It suggests that there is illegal activity going on, but it doesn’t provide the S.E.C. a road map. You certainly can’t prosecute someone for having a good return on a company by somebody they went to college with.”
“Something about these social networks is allowing portfolio managers to better predict the future returns of companies within the network,” said Lauren Cohen of Yale, another author.