Terrific mutual funds – and ghastly ones | Economy | NewJerseyNewsroom.com -- Your State. Your News.

BY WARREN BOROSON

NEWJERSEYNEWSROOM.COM

BOROSON ON MONEY

Stop your whimpering.

You're not the only person suffering during this miserable stock market.

Just consider those blighted beings who owned shares of ProFunds Ultra Bull, which has lost 11.26% a year over the past ten years. (All numbers are to the end of May.) This fund tries to do twice as well as the Standard & Poor's 500 Stock Index, using derivatives. In the monstrous year of 2008, the fund lost an even more dismal 67% of its value. As Morningstar, the financial publishing house, writes, the fund "plays with fire and gets burned."

To have chosen a really big winner over the last ten years, in general you would have had to specialize. ING Russia rose 21.86%, Vanguard Precious Metals & Minerals was up 20.47%, and CGM Realty jumped 18.79%. (Don't tell me you didn't read my column of 10 years ago praising these funds!)

Of course, you don't have to win big to be a happy camper. Doing decently would be okay, and a few funds have actually acquitted themselves with honor.

The other day, I made my regular peregrination to the Hackensack library to check out the latest issue of Morningstar. (The publication has heartlessly stopped giving me a free subscription.) I searched for "six star" funds — funds that have been rated "high" for return and "low" for risk, and thus deserve more than the mere five stars that they received. (Morningstar bestows no more than five stars.) Usually I find only a handful of six-star funds, but this time there were almost 30.

Some were familiar names, like Mutual Global Discovery A, Janus Aspen Balanced, Permanent Portfolio, Heartland Value Plus, Fidelity Floating Rate High Income, and Royce Special Equity.

A big surprise among the six-star funds: Amana Trust Income, a large/value fund mainly for Muslims. It doesn't invest in companies involved with gambling, pornography, or pork, or companies that charge or receive interest. One reason for its success: It avoided all those dreadful financial companies.

Even though it's smart to buy funds from a respected name, even a few funds from families with glittering reputations came to grief over the past 10 years. Examples: Fidelity Growth Strategies: down 9.22%. T. Price Price Science & Technology, off 7.79%. Janus Global Technology, down 7.16%. And Vanguard U.S. Growth, down 6.65%.

Okay, quiz time. Name the only domestic stock fund that didn't lose money in 2008, when the S&P 500 dropped 37%. Answer: Forester Value N, a large/value fund in Libertyville, Ill. In 2008, it gained 0.39%.

Thomas Forester's caution has enabled him to compile a fine record. Over five years, the fund is up 3.7% a year. Minimum first investment: $2,500. No-load. (800) 388-0365.

Another little-known gem is Auxier Focus Investment, in Portland, Me., a large/value fund with a mere $107 million in assets. It "deserves more attention," writes Morningstar. The fund manager is J. Jeffrey Auxier, and his fund has returned around 3% a year over five years. Minimum investment is $5,000; (877) 328-7437. The fund lost 24.52% in 2008 — relatively modest.

Some other six-star funds: American Century Equity Income, Matthews Asia, Vanguard Dividend, FMI Large Cap, Waddell & Reid Science & Technology, and Westport R.

As for fund families that have done wonderfully, how about First Eagle? It has three funds rated by Morningstar: one gets six stars (U.S. Value), one five stars, and one four stars. (The funds have sales charges.) They are continuing the winning ways of their gifted former manager, Jean-Marie Eveillard.

Then there are three Gabelli funds, two of which are rated five stars and one four stars.

As usual, the Mutual Series funds in Short Hills have done amazingly well: The six funds rated have an average rating of over four stars. (Part of the Franklin family now, they have sales charges.)

Talking of New Jersey funds, a fairly new one, Wintergreen in Mountain Lakes, gets five stars. It's run by David Winters, who came from Mutual Series.

Franklin Rising Dividend A, in Fort Lee, gets four stars.

The seven MainStay funds in Parsippany have an average rating of over three stars.

I cannot conclude a list of outstanding funds without mentioning a fund that began in New Jersey, then fled to Miami. Namely, the sensational five-star Fairholme Fund. Bruce Berkowitz, the manager, was named Morningstar's domestic-stock manager of the decade in January. (He's pictured.) This year, the fund is up 7.08%; over ten years, 12.92% a year. The minimum first investment is $10,000; (866) 202-2263.

Just our wretched luck that the first U.S. stock fund manager named Morningstar's manager of the decade decided to up and leave New Jersey.

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