This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Long/Short Funds for the Long Haul

In 1995, long-short funds began an impressive streak. For 13 consecutive years, the group made money, according to Morningstar. No stock category came close to matching that record. Even such safe bond categories as intermediate government and intermediate municipal posted some losing periods.

During the late 1990s, the long-short funds attracted little notice. At a time when the S&P 500 was returning more than 20% annually, few investors cared about a vehicle that quietly delivered single-digit results. But in the difficult markets of this decade, the long-short funds began to stand out. In 2000, the funds returned 9.57%, 18 percentage points ahead of the S&P 500. The next year, the long-short portfolios returned 5.37%, outdoing the S&P by 17 points.

During the decade ending this June, the funds returned 3.51% annually, about half a percentage point ahead of the S&P.

As investors came to appreciate vehicles that could stay in the black, fund companies introduced new choices. The number of long-short funds has climbed from 12 in 2000 to 54 now.

To be sure, most of the new selections are not worth considering. Many charge high fees and deliver meager returns. But a handful rank as superior. These can serve as diversifiers, rising when stocks are heading down.

As their name suggests, long-short funds hold conventional stock portfolios -- known as long positions -- and also sell some stocks short, betting that prices will drop. In bull markets, the short positions drag down returns, but in downturns the funds surge ahead of the markets.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
ICE $230.41 -1.60%
AAPL $126.75 0.27%
FB $80.01 -1.50%
GOOG $567.61 -1.30%
TSLA $194.26 -3.20%

Markets

DOW 17,856.78 -278.94 -1.54%
S&P 500 2,071.26 -29.78 -1.42%
NASDAQ 4,927.37 -55.4390 -1.11%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs