Forbes featured an article titled “Clever/Clueless,” which featured well known funds, which stand out for better or worse:
The market can make anyone look either clever or clueless in the short term, but some fund managers have been skilled enough to post market-beating returns over the last 10 years.
Others have performed dismally in both bull and bear markets. CGM Focus has an annualized 10-year return of 15.9% and an “A” rating in both up and down markets.
This fund has been spectacular at times: in 2001, when the S&P; 500 lost 12%, it gained 48%. In 2007 when the S&P; managed to eke out a total return of only 5%, it returned 80%. One caveat: With a highly concentrated portfolio of only 20 or so stocks, CGM Focus can also be risky. In fact, over the last 12 months the CGM fund had a -58.6% return versus -26.2% for the S&P.;
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There is just no right or wrong answer, although many investors are still looking for the one fund to be held through thick and thin.
CGM Focus, despite its long term stellar performance, turned out to be the worst fund during last year’s meltdown and should not be held regardless of market conditions. Losing over 58% in the past 12 months is just not acceptable and investors that were banking on this fund to protect them from market uncertainties faced a rude awakening.
Simply following long-terms tends, and taking evasive action at critical crossover points, would have avoided at lot of portfolio pain in 2008 just as it did in 2000.