Quantcast
WHAT'S NEW? Our Latest Updates!

New GendeX Mutual Fund is Cooler Than You

Ultra-hip mutual fund company Thrasher Funds takes aim at the long-coveted young investor market with their just-launched and peculiarly capitalized GendeX Mutual Fund.

According to the firm's website:

The GendeX Mutual Fund was developed and is managed by young adult investors for young adult investors. A group of more than 60 million Gen X and Y'ers largely untapped by the financial market place...until now.

The GendeX Mutual Fund offers this demographic the opportunity to leverage their youth, along with a disciplined investment and savings strategy to help use what they already know to engage the stock market. We provide this Next Generation of investors the opportunity to invest in markets near to them, while providing the structure, fundamentals, and diversity currently available in investment products aimed at older generations.

We created The GendeX Fund for any investor who does not feel a connection to the traditional investment establishment. Welcome Home."

Besides a website featuring photos of attractive twenty-somethings and even an original soundtrack, the new no-load fund attempts to woo young investors by offering an initial minimum investment requirement of just $100 with enrollment in an automatic investment plan ($2,500 minimum for non-AIP investments). The fund is on the expensive side with a 1.5% (capped) total expense ratio. There is also a a $2 per month maintenance fee for accounts under $2,500, and a 2% redemption fee shares sold within a year of purchase – a bit high and long for a fund that owns mostly actively traded U.S. stocks...

Conundrums Lead to Investment Opportunity

In Alan Greenspan’s most famous market commentary, he merely hinted at the possibility of irrational investor exuberance. The ensuing far more irrationally exuberant behavior in the stock market was surprisingly ignored by Greenspan, at least publically. His second most famous market commentary centered on the 2005 bond market. Greenspan testified before Congress that the flat yield curve with low long-term interest rates around the globe was a "conundrum". 

Go Big Or Go Index?

The largest funds (in terms of investor assets) are often the ones with the best track records – they don’t get big by accident. These monster funds deliver huge profits to the companies that run them, so they can afford to hire the best managers. Giant funds also tend to have lower fees because they have so many shareholders to cover fund operating costs. Sounds like a recipe for continued success.

So what is the better investment – a big successful actively managed fund or an index fund?

Morningstar takes a look back at how the ten biggest funds of 1997 in the large cap blend category did in the ensuing ten years.

Of the 10 biggest large-blend funds back in 1997, six have outperformed the majority of their rivals since October 1997. We recommended five of those funds for purchase at that time….The other four funds in that group of 10 have underperformed their typical large-blend rival since 1997. True, we did recommend all four funds at the time…"

The takeaway from this article appears to be that big funds do well (and that Morningstar seems likes recommending big funds…). But a 60% success rate is not particularly impressive.

Throwing darts at large blend funds in 1997 and falling asleep at the wheel for ten years should lead to a 50% success rate – odds are half of the dartboard funds would be in the top half of the performance curve...

september 2007 performance review

The Dow climbed 4.16%, and the S&P 500 was up 3.72% in September. Both indexes beat smaller caps, which rose a relatively paltry 2.91% (Russell 2000) in comparison. Tech stocks were particularly strong, with the Nasdaq jumping 4.14%. Larger cap tech represented the best of both worlds, as the Nasdaq 100 index climbed 5.14% for the month.