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Mutual Funds: Good Time to Stay Put?Six years into the first decade of this century, a glance at the stock market indexes shows why it was an era of disappointment for many investors. From 2000 to 2005, the average annual return of the S&P 500 was –1.14 percent, and the cumulative return for the same period was –6.63 percent.1Undoubtedly, it has been a turbulent period fraught with terrorism, war in the Middle East, and episodes of corporate scandal. Painfully, mutual fund investors have learned not to count on the double-digit stock market returns that they once took for granted. It might help to remember that in good times or bad, market fundamentals and the overall economy can have a direct effect on stock prices. Gauging GrowthThe economy has continued to grow, despite a series of shocks that include several devastating hurricanes in the Gulf of Mexico and high oil prices. Gross domestic product has grown between 2.7 percent and 4.5 percent each year since 2003, and economists have predicted that the economy will grow by 3.25 percent in 2006.2,3 
Profits Stay PositiveMore good news: The operating earnings per share for S&P 500 companies have risen 90 percent during the last four years.4 Furthermore, if the consensus forecast of 13 percent earnings growth in 2006 comes to fruition, it would mean an unprecedented fourth consecutive year of double-digit earnings growth.5 Over the last three years, the S&P 500 has risen cautiously toward its peak in 2000. Could it be that several years of solid economic growth and impressive corporate profits will ultimately bode well for stock market returns? Even professionals can't predict exactly how the financial markets will respond to positive reports or external shocks. However, only those investors who have realistic expectations and stick to a disciplined approach will be in a position to benefit when the markets perform favorably. Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest. 1) Thomson Financial, 2006, for the period 12/31/1999 to
12/31/2005. Stocks are represented by the S&P 500 Composite Index (total
return), which is generally considered representative of the U.S. stock
market. The performance of an unmanaged index is not indicative of the
performance of any particular investment. Individuals cannot invest directly
in an index. Past performance is no guarantee of future results. |
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