This Day On The Street
Continue to site right-arrow
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
TheStreet Open House

Popular Index Funds Perform Poorly

Stocks in this article: MSFT NKE GIS STJ

Searching for ways to select funds, Morningstar recently looked at Sharpe ratios as well as Morningstar's own star rating system, which relies on risk-adjusted past performance. The Morningstar researchers found that risk-adjusted past performance can have some predictive value. But the researchers determined that investors can increase the odds in their favor by considering both risk-adjusted returns and expense ratios. Funds that had low costs and strong risk-adjusted returns were likely to do well in the future.

Picking active funds requires making subjective decisions. You must strive to find funds that seem to have a sensible investment approach that is likely to thrive in the future. But by sticking with managers that have long records of consistent success, it is possible to find funds that deliver sound returns.

A top choice is Parnassus Equity Income (PRBLX), which has returned 7.4% annually during the past 10 years, outdoing 99% of its large-blend peers and topping the S&P 500 by 4.7 percentage points annually. Working hard to limit risk, manager Todd Ahlsten excels in downturns. The fund topped the S&P 500 by wide margins during the downturns of 2000 and 2008. Parnassus holds reliable performers, such as Microsoft (MSFT - Get Report) and Nike (NKE - Get Report).

Another steady performer is Mairs & Power Growth (MPGFX), which has returned 7.3% annually during the past decade. Manager William Frels looks for rock-solid companies that can grow consistently. Holdings include blue chips, such as cereal maker General Mills (GIS - Get Report) and device maker St. Jude Medical (STJ - Get Report).

Readers Also Like:

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link 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

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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!


DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

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