Great year for bread and butter strategies on Wall Street

Dec. 31, 2013 at 3:01 PM
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NEW YORK, Dec. 31 (UPI) -- Bread-and-butter mutual funds beat the bells-and-whistles hedge fund portfolios on Wall Street this year, data show.

They may be drab, but the basic, across-the-board stocks handily out-performed those complex bets that hedge funds can't seem to get enough of, the Wall Street Journal reported Tuesday, the last day of the year in which the Dow Jones industrial average, with dividends included, rose 29 percent.

The Standard & Poor's 500 index, with dividends added in, rose 32 percent on the year, the Journal said.

That was good enough for mutual funds. The average mutual fund large-company stocks rose 32 percent in 2013, while small-company mutual fund stocks rose 38 percent, Morningstar Inc. data show.

By comparison, the HFRI Equity Hedge Index through November was up 13 percent on the year. By the close of trading Tuesday, Hedge Fund Research Inc. President Ken Heinz predicted the index would come up just shy of 14 percent on the year.

"The more colorful your pie chart, the worse you did," Mayflower Advisors managing partner Lawrence Glazer, told the Journal.

The lesson for the year -- although things could change -- appeared to be to hold onto those basic, brand name stocks and skip the fancy benchmark buy and sell second-guessing.

"All of the sales we made this year have been mistakes. If you could've just invested in one of the major indexes, and worked on your golf game the rest of the year, you would've hit a home run," said David Rolfe, chief investment officer at Wedgewood Partners in St. Louis, which manages $7 billion of assets.

It was a good year to dumb down and fiddle as little as possible. While trying to convince one client into diversifying his strategy this year, Chad Carlson, a wealth manager at Balasa Dinverno Foltz in Illinois, said the client responded by asking him, "Why the heck would I want to do that, when the market is up 29 percent?"

But the client, eventually, relented. "I'm paying you guys to do this stuff, and I don't necessarily agree, but go with it. If you're wrong, I'm going to jump on you," the client said after an hourlong meeting.

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