Five Winning Funds: Yes, Investors, There Are Large-Cap Growth Winners

For this week's Five Winning Funds, we should begin by noting that of the 480 mutual funds tracked by Morningstar in this category, only four avoided losing money in 2002. And all four were short funds.

If you haven't guessed already, we are talking about large-cap growth funds, the juggernauts of the Roaring Nineties that have been gored by the bear market of the past three years.

"It's been a brutal three years for large growth funds," says Paul Herbert, fund analyst for Morningstar. The average large-cap growth fund has lost 12% a year for the past three years -- in dollar terms, $10,000 invested in your average category fund on May 6, 2000, would be worth $6,800 today.

Before you throw in the towel on the category, realize three things: First, an asset class doesn't go down -- or up -- forever (in fact, large-cap growth funds have had a nice little run recently, up 9.28% since Jan. 30, according to Lipper). Second, a diversified portfolio of stocks and bonds needs a sizable minority of large U.S. stocks. And third, once you look beneath the numbers, you will find some bona fide winners --including those on our list.

The Long View

"If you believe in long-term investing, there's certainly no reason to decrease your large-cap growth exposure," says Ben Tobias of Tobias Financial Advisors in Plantation, Fla. "I would at least suggest you maintain your holding. In fact -- and I didn't say this a few years ago -- you're probably better off if it's a little higher over the next few years."

The five funds we highlight are among the very best in a crowded pack. But first, a few pointers on large-cap growth investing. How much should you own?

"It really depends on your age and your appropriate risk levels," says Deborah Voso, president of Frederick, Md.-based Voso Financial Advisers. Using general guidelines, Voso says for investors in their 20s and 30s, large-cap growth should make up 50% or more of one's assets; the percentage drops to 40% for investors in their 40s and 30% for older investors.