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Kenneth Fisher: I Still Hate Funds

January 15, 2006 | About:
Not long ago, Ken Fisher wrote a column about the problems with annuities. This time it's mutual funds. The problems: Over the long term the average fund in pretty much every category has fallen short of the S&P 500 index or whatever other benchmark is relevant. Next problem: costs. The average expense ratio for the U.S. equity funds tracked by FORBES is 1.23% a year. The third problem: taxes. Funds cannot pass through losses to their shareholders. He suggested 53 stocks in 2005, including stocks re-recommended from 2004, and they collectively were up 14.3%, after a hypothetical 1% transaction haircut on new positions.

He tends to recommend foreign stocks these days: Switzerland's Converium Holdings (6, CHR) is a dirt-cheap general insurer operating in 60 countries. Britain's Lloyds TSB Group (36, LYG) is a bargain at 12 times the earnings and 20 times the dividend. The world's largest steelmaker, Holland's Mittal Steel (28, MT). Finally in the U.S. Parker-Hannifin (72, PH).

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