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October was one of the rare months this year in which the riskiest funds turned in the best results. Communications and technology were the top-performing categories in the month, with gains of 17.9% and 16.4%, respectively. Despite their recent surge, those two sectors, with losses of 43% each, continue to post the worst results year-to-date (see BW Online's Interactive Mutual Fund Scoreboard).
High-tech and telecom stocks were clearly underrepresented in the average diversified fund. In October the S&P 500-stock index (which weights sectors mainly based on market capitalization) climbed 8.8%, while the average mutual fund climbed only 5.8%. Large-cap funds, up around 7% for the month, fared a bit better. Small-cap funds rose about 3%.
HOT RISERS. Within the communications and technology sectors, Internet and wireless funds did the best. ProFunds Ultra Wireless Services (WCPIX
), the top performer of October, was up 61% (it's still down 79% year-to-date). Jacob Internet (JAMFX
) lifted 32%, and RS Internet Age (RIAFX
) rose 29%. Rydex Dynamic Velocity 100 (RYVYX
) and ProFunds UltraOTC (UOPIX
), two similar funds that offer souped-up returns on the Nasdaq 100 index, were both up 38%.
Of more diversified, actively managed funds, Legg Mason Focus Trust (FOCTX
) was a standout, with a 21% gain. With its 9.6% year-to-date loss, it's the only top 100 performer in October that can boast merely single-digit declines for the year. Bailard Biehl & Kaiser Enhanced Growth (BBEGX
) was up 18.3% (down 35% year-to-date).
Funds that did the worst in October were those betting that the market would fall. Funds offered by Rydex and ProFunds that short the Nasdaq 100 index each fell 33% for the month. Two sectors that had previously done quite well this year were among the worst-performing categories. Precious-metals funds were down an average of 8.8% in October. Real estate funds also fared badly, falling 3.7%.
SHORTER DID BETTER. Risk paid off on the fixed-income side. The best-performing category was emerging-markets funds, up an average of 6% in October. Alliance Emerging Markets Debt (AGDAX
) gained 9.2%. Convertible-bond funds picked up 2.3% on average, and the month's top-performing bond fund was Ariston Convertible Securities (CNCVX
), which surged 13.8%. High- yield bond funds were essentially flat, losing 0.2% for the month.
As interest rates rose during the month, the average bond fund fell 1%, and only the very shortest-term government and diversified bond funds stayed in the black. Ultrashort bond funds eked out a 0.1% gain, and short government funds picked up 0.2%. Long-term municipal-bond funds and long-term government funds fared among the worst, each losing about 2% in the month. American Century Target Maturity 2030 (ACTAX
), among the longest-term bond funds available, fell a punishing 9.2% in October.
October wasn't a great month to bet on interest rates. But it was good for investors with any faith left in the battered Internet and telecom sectors -- even though those funds still have a long way to go to make up for losses suffered through most of this year.
Equity Funds rated A in October:
AIM Global Health Care A
AIM Mid Cap Core Equity A
AIM Small Cap Growth A
ARK Small Cap Equity Retail A
Advisors Inner Circle FMC Select
Amer Century Equity Inc Inv
Ameristock
Ariel
Ariel Appreciation
Armada Small Cap Value I
Artisan International
Artisan Mid Cap
Artisan Small Cap Value
BNY Hamilton Sm Cap Gr Inv
Baron Growth
Baron Small Cap
Berger Balanced
Berger Small Cap Value Inv
Bjurman Micro Cap Growth
BlackRock Intl Sm Cap Eq Inv B
Bridgeway Aggressive Investors I
Bridgeway Ultra Small Company
Bridgeway Ultra Small Company Tax Adv
Bruce
CGM Focus
Calamos Growth A
California Investment S&P Mid Cap Index
Chesapeake Core Growth
Clipper
Conseco Equity Y
Diamond Hill Bank & Financial A
Dodge & Cox Balanced
Dodge & Cox Stock
Dreyfus Index Fds Midcap Index
Eaton Vance Wldwd Hlth Sciences A
Evergreen Tax Strategic Foundation
Exeter Defensive A
FBR Small Cap Financial A
FBR Small Cap Value A
FMI Common Stock
FMI Focus
Federated Mid Cap Index
Fenimore Asset Management Tr Value
Fenimore Equity Income
Fidelity Advisor Healthcare B
Fidelity Advisor Mid Cap T
Fidelity Export & Multinational
Fidelity Fifty
Fidelity Japan Small Co
Fidelity Low Priced Stock
Fidelity Mid Cap Stock
Fidelity New Millennium
Fidelity Select Brokerage & Investment
Fidelity Select Insurance
Fidelity Select Software & Computer
Fifth Third Strategic Income Adv
First American MicroCap Y
First Eagle Fund Of America Y
First Eagle SoGen Gold
First Eagle SoGen Overseas A
Fremont US Micro Cap
Fremont US Micro Cap Instl
GAMerica Capital A
Gabelli Investor ABC
Growth Fund of America A
Hennessy Cornerstone Growth
Hotchkis & Wiley Mid-Cap Value I
ICON Financial
ICON Healthcare
ICON Information Technology
ICON Leisure and Consumer
IDEX Janus Balanced B
IMS Capital Value
ING International Small Cap Growth A
INVESCO Leisure Inv
Janus Adviser Balanced I
Janus Adviser Capital Appreciation I
Janus Adviser Core Equity I
Janus Aspen Cap Appreciation Instl
Janus Aspen Core Equity Instl
Janus Balanced
Janus Core Equity
Jensen
Julius Baer International Equity A
Kinetics Internet
Liberty Acorn Z
Longleaf Partners
Lord Abbett Mid Cap Value A
MFS International New Discovery A
MSB
Mairs & Power Growth
Marshall Mid Cap Value Inv
Matthew 25
Matthews Asian Growth & Income
Matthews Korea
Merger
Meridian Growth
Meridian Value
Merrill Lynch Global Small Cap B
Merrill Lynch Healthcare B
Morgan Stanley Financial Services Trust B
Morgan Stanley Health Sciences Trust B
Morgan Stanley Instl Small Company Gr B
Mosaic Equity Tr Mid Cap
Mutual European Z
Mutual Financial Services A
Navellier Perf Mid Cap Growth
Needham Growth
Neuberger Berman Genesis Inv
North Track PSE Tech 100 Idx A
Oakmark Equity & Income I
Olstein Financial Alert C
One Group Mid Cap Growth I
Osterweis
PBHG Large Cap Value
PBHG Mid Cap Value
PIMCO RCM Global Health Care
PIMCO Renaissance A
Parnassus Income Equity Inc
Pax World Balanced
Quaker Aggressive Growth A
Reserve Private Eqty Small Cap Growth R
Royce Low Priced Stock
Royce Opportunity Inv
Royce Pennsylvania Mutual Inv
Royce Total Return
Royce Trust & Giftshares Inv
Santa Barbara Bender Growth C
Schroder Capital Ultra Inv
Scudder Micro Cap Invest
Scudder Target 2010
Security Mid Cap Value A
Sentinel Small Company A
Sequoia
Smith Barney Aggressive Growth A
Standard & Poor's MidCap 400 Depositary Rcpt
T Rowe Price Capital Appreciation
T Rowe Price Financial Services
T Rowe Price Health Sciences
T Rowe Price Media & Telecommunications
T Rowe Price Mid-Cap Value
Thompson Plumb Balanced
Thompson Plumb Growth
Touchstone Emerging Growth A
Transamerica Premier Balanced Inv
Transamerica Premier Growth Oppt Inv
USAA Precious Metals & Minerals
Value Line Emerging Opportunities
Value Line Special Situations
Vanguard Capital Opportunity
Vanguard Health Care
Vanguard International Explorer
Vanguard Precious Metals
Vanguard Wellesley Income
Vontobel US Value
WM West Coast Equity A
Waddell & Reed Adv Asset Strategy A
Waddell & Reed Adv Science & Technology A
Wasatch Core Growth
Wasatch Micro Cap
Wasatch Small Cap Growth
Wasatch Ultra Growth
Weitz Partners Value
Weitz Value
Wells Fargo Strategic Income I
William Blair International Growth N
Stone is an associate editor of BusinessWeek Online and covers the markets as a Street Wise columnist and mutual funds in her Mutual Funds Maven column Edited by Patricia O'Connell
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