Fidelity Select Fundranker

Fundranker Blog—Market Perspective

Market Perspective

Let’s review what happened in the market from its high in October, 2007, through the end of 2008 and try to put it in perspective. This isn’t just a run of the mill bear market and recession. We are in the midst of the worst downturn since the Great Depression. In general, nearly $7 trillion of shareholders’ wealth disappeared, setting them back nearly five and a half years. For Fundranker investors, however, this downturn set us back three and a half years, which is bad, but not nearly as bad as the general market.

Fidelity Investments’ Select funds, taken as a group, reflect the market as a whole and were hit hard and across the board in 2008. All 41 funds had losses for the year, ranging from 11.35% to 63.16% and averaging 40.98%, so it’s not surprising that the S&P 500 tracking portfolio, the Top Eight Model Portfolio, and the Nasdaq Composite tracking portfolio lost 40.104%, 41.132%, and 44.306%, respectively, from November, 2007, through December, 2008. For comparison, in the previous downturn, September, 2000, through March, 2003, a much longer period, the Top Eight Model Portfolio lost 24.465% and the S&P 500 tracking portfolio lost 42.129%. Fundranker was able to withstand that previous downturn much better than the market. We all thought it was bad when the Internet bubble burst, but this current crisis has done nearly as much damage to the S&P 500 in much less time and may have farther to go.

The Fundranker system works by positioning an investor in the best performing Select funds. Most times, there are at least a few Select funds that are performing well, and the Fundranker system is able to pick them out, hence its long-term, market beating results. In the first half of 2008, when oil peaked above $147/barrel, energy and natural resource funds performed amazingly well and allowed Fundranker to buck the general downtrend. In the second half of the year, however, the downturn spread to all sectors of the market, none of the Select funds were performing well, and the Fundranker system was reduced to selecting the least worst performing Select funds.

Finally, in December, over three-fourths of the Select funds came out of their funk and turned in some nice returns, which will give the Fundranker system some better grist for the mill, so to speak, but it remains to be seen if this is the beginning of a sustained market recovery. The incoming presidential administration seems to be taking the situation very seriously and has proposed a massive stimulus program, so perhaps 2009 will be brighter.

Posted 1/1/09 10:38pm ET in Investing