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401k and Personal Finance

Best mutual fund and shareholder return

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It’s that time again, the end of 2009 (and the decade of 2000s) means we can also look at the performance of mutual funds in past year/decade. The winner of US based mutual fund is CGM Focus fund, managed by Mr. Heebner, the fund’s manager since its 1997 launch. CGM Focus is a large cap growth fund with annualized total return of 18.2% in last 10 years (source: WSJ, Best Stock Fund of the the Decade: CGM Focus). Sounds pretty good, right?

Not really. According to MorningStar in the same article:
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Too bad investors weren’t around to enjoy much of those gains. The typical CGM Focus shareholder lost 11% annually in the 10 years ending Nov. 30, according to investment research firm Morningstar Inc.

These investor returns, also known as dollar-weighted returns, incorporate the effect of cash flowing in and out of the fund as shareholders buy and sell. Investor returns can be lower than mutual-fund total returns because shareholders often buy a fund after it has had a strong run and sell as it hits bottom.

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