Mar 25 2011


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Giving Credit Where Credit is Due

Investors deserve more credit than most academics realize. 

When their performances are strong, they usually stick to their selected fund companies.  When their performances are weak, they generally bail.

 The top fund company, in terms of performance, is Vanguard.  And you can see that their loyalty ranking is also number one.

At the bottom of the heap, in terms of performance, you have Putnam.  Likewise, investors haven’t been loyal to the company—moving their money out of Putnam based on weak returns.

Investors don’t keep their money with a company when it’s not performing.  Obviously, the average investor is far more aware than we think.

Company Performance Ranking Company Name Company Loyalty Ranking
#1 Vanguard #1
#2 DFA n/a*
#3 TIAA-CREF n/a*
#4 T Rowe Price #4
#5 Janus #10
#6 American Funds #5 (Tied with Fidelity)
#7 Franklin Templeton #6
#8 Morgan Stanley #9
#9 Fidelity #5 (Tied with American Funds)
#10 Barclays Global n/a
#11 AIM Inv. #14
#12 Columbia Funds #13
#13 Goldman Sachs #11
#14 Dreyfus #12
#15 Mainstay Funds n/a
#16 John Hancock #7
#17 ING Investments #8
#18 Putnam #15

 Note—With loyalty rankings, I can make educated assumptions that DFA and TIAA-CREF are likely in the top 3, despite the fact that I don’t have loyalty ranking data for them.

Source:  Morningstar ratings for long term funds, as of 12/2007—Text Source:  Don’t Count On It  

 That said, there’s one factor that doesn’t get calculated into the company fund rankings above:

Sales Fees

You don’t have to buy mutual funds that charge sales fees.  They’re lucrative for the people who sell you the funds, but the added financial liability isn’t fair.  For example, if you invest $100,000 with most American Funds, you’ll end up paying $5,750 in fees, directly to your broker.  The 5.75% sales fee means that you’ll have to make 6.1% on your money the following year, just to break even.

That kind of financial gouging doesn’t get included in fund performance calculations. 

So if you invest with actively managed mutual funds, so “No” to sales loads.

About the author

andrew hallam

I'm a freelance finance writer, lucky enough to have been nominated as a finalist for two Canadian National Publishing Awards. I'm also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, a book explaining how I became a millionaire on a teacher's salary, while still in my 30s. Working to empower people financially, I'm available to motivate and inspire people on basic retirement planning and index investing. I'm happy to comment on your questions, first, please read the Terms of Use.

Permanent link to this article: http://andrewhallam.com/2011/03/giving-credit-where-credit-is-due/


  1. avatar
    Andrew Hallam

    Just an added note. When purchasing $100,000 worth of American Funds, the sales load would cost you $5,750. Unless most of us sell our homes and put $100K into the stock market, we're not going to make a $100,000 deposit in a single year! If you read that before I changed it, please blame it on fast typing and too much green tea.



  2. avatar
    Invest It Wisely

    In any good free market, the cream rises to the top. Just gotta help more people enjoy that cream by showing them how good it can be. There are those that will never jump to index investing, and that's fine too, so long as people are aware of their options and can make an informed choice.

  3. avatar
    Jeri Hurd

    I see you rank TIAA-Cref pretty highly, too. I just read your book, am completely inspired. I have an account with TIAA-Cref through a previous school plan. I can't add to that, but I can start another one. I'm not sure if I should do that, or start an account with Vanguard. Any thoughts? (though I don't think my current schools in Beijing, which will contribute 6%, would count Vanguard as a retirement plan).

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