An Evaluation of Stock Mutual Funds

Author

Surapee Yamjitnim, Fontbonne College

Year of Award

1993

Degree

Master of Business Administration (MBA)

College

College of Business & Professional Studies

Degree Program

Business Administration

Department

Business Administration

Keywords

mutual, growth, investment, portfolio, income, shares, market

Abstract

During the 1980s, mutual fund investors shied away from the stock market. Few investors wanted to risk money in stocks when safe money market funds were yielding as much as 16 percent at the beginning of the decade. Investors could also have done very well in bonds at that time—either in low-risk government bond funds or higher-risk junk, bond funds, both of which sported double-digit yields.

Even so, stock funds also performed spectacularly, rewarding those who were willing to accept slightly more risk. The Lipper Growth Fund Index, which charts stock funds much the way Standard & Poors' 500-stock index charts stocks, increased nearly threefold, from 163.5 to 461.6 during the 1980s. However, fund investors missed most of the 1980's bull market in stocks. The portion of mutual fund assets stashed in stock funds has stayed essentially flat since recovering from the lows reached during the recession of 1981-1982. This will have to change in the 1990s.

Investors who want to earn robust returns on their money during this decade will not have a choice, because the huge fixed-income returns of the 1980s were a historical anomaly. Over time, the return on bonds is much less than stocks. A study by Ibbotson Associates in Chicago found that in the sixty-five years from 1926 to 1990, common stocks returned an annual average of 12.1 percent. In that time, long-term corporate bonds returned 5.5 percent compared to 4.9 percent for long-term government bonds. Considering that inflation averaged 3.2 percent in that period, bond investors clearly do not have much of an edge during the long term.

That is not to say that investors cannot lose money in the stock market. Over short periods, stock fund prices can be very volatile. Years such as 1973-1974, 1981-1982, and 1990 were terrible years for stock investors. In the long run, stocks have always outperformed other types of investments by a wide margin, and despite difficult times, sooner or later perform strongly enough to offset the severest losses.

The purpose of this thesis is to evaluate stock mutual funds. It will not only show mutual fund basics, but will cover the different types of stock mutual funds, including how and where to purchase them.

Document Type

Restricted Thesis

Recommended Citation

Yamjitnim, Surapee, "An Evaluation of Stock Mutual Funds" (1993). All Theses, Dissertations, and Capstone Projects. 254.
https://griffinshare.fontbonne.edu/all-etds/254