Money in the banks.After taking a two-year beating, bank stock funds could see a comeback Comeback Australian breed of wool sheep, bred by crossing Merino with Corriedale, Polwarth or Zenith sheep; wool is 21 to 25 microns. It is a registered breed, but the term is more commonly used in the sense of a type of sheep produced by crossbreeding a crossbred Merino back to Merino. There's nothing like rate cuts to wake up bank stocks. So imagine how happy investors in financial mutual funds were while the Federal Reserve sliced away at interest rates in 2001. Here's why: Low rates help bank stocks because the rates make it easier for financial companies to boost profits. First, a decrease in rates gets borrowers interested in taking out new loans. And the more loans a bank floats, the more interest it collects from borrowers--income that fattens its bottom line. Lower rates also make the raw material banks depend on--cash--cheaper to get. Long-time bank analyst and Portfolio Manager Raymond Raymond, town, Canada Raymond, town (1991 pop. 3,130), S Alta., Canada, SE of Lethbridge, in a sugar beet area. Sugar is refined and honey is produced there. A provincial agricultural college is in the town. C. Stewart Stewart, river, Canada Stewart, river, 331 mi (533 km) long, rising in the Mackenzie Mts., central Yukon Territory, Canada, and flowing generally W to the Yukon River S of Dawson. , who manages money for his firm RASARA Strategies Inc. in Briarcliff Manor, New York Briarcliff Manor is a village in Westchester County in the state of New York. It is shared between the towns of Mount Pleasant and Ossining, and lies entirely within the ZIP code of 10510. , says bank stocks typically rally almost immediately after the Fed cuts rates. That's good news given that Fed Chairman Alan Greenspan Alan Greenspan Dr. Greenspan is Chairman of the Board of Governors of the Federal Reserve System. Dr. Greenspan also serves as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. had already taken a buzz 1. buzz - Of a program, to run with no indication of progress and perhaps without guarantee of ever finishing; especially said of programs thought to be executing a tight loop of code. saw to rates six times when he struck once more in August. The cuts have decreased the Fed funds fed funds See federal funds. rate from 6.5% to 3.5%. The next few years could be big for bankers, and not just because of interest rates. Since the '90s, U.S. laws governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the mergers of financial companies have loosened. As a result, the banking industry has undergone a major round of consolidation. Now that banks are allowed to own branches and operations across state borders, the industry's biggest players--Citigroup, JP Morgan Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. Chase, NationsBank NationsBank was one of the largest banking corporations in the United States, based in Charlotte, North Carolina. In 1998, it acquired BankAmerica to become Bank of America. , and others--have prowled about for banks to buy. By absorbing smaller banks, the big fish can get a leg up on new markets and trim their costs. "There are about 8,500 banking companies out there now," reports Stewart. "Some experts say for the industry to run at peak efficiency, we should be down to about 6,000 banks in five to 10 years, so there's a ways to go." Be aware of one caveat: A slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in the nation's economy could well raise the number of corporate defaults and bankruptcies, which in turn could eat into bank profits. Stewart says he's he's 1. Contraction of he is: He's going to school today. 2. Contraction of he has: He's already been to the museum. not too worried, however. That's because the banking industry has been resilient See resiliency. enough to grow earnings an average of 9% a year since 1975. To get in on the action, we suggest that you consider a financial mutual fund, an investment that will spread your money into as many as a few dozen stocks benefiting from good news in the industry. To dig up the best of the lot, we turned to Morningstar Inc., the Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. firm that monitors mutual funds of all types, to sift through the 100 financial funds the company covers. To see how the funds perform through good times and bad, we ranked them by their three-year average annual total return as of June June: see month. 30, 2001. We then narrowed our scope to funds focusing on banking, weeding weed 1 n. 1. a. A plant considered undesirable, unattractive, or troublesome, especially one growing where it is not wanted, as in a garden. b. Rank growth of such plants. 2. out portfolios that might stray Stray (1) Not a member of the participating party in the trade at hand; (2) not a meaningful indication of a customer's desire to take a sizable position or be involved in a stock. too far afield into insurance or brokerage stocks. We also focused on funds with relatively low initial investment requirements and those that offer first-time investors an automatic investment program with a minimal outlay to start. Finally, we whittled down the field to the five funds with the best track record.
Top Financial Services Mutual Funds
Year-to- 1-Year
Fund Name (Ticker) Date Total
Return(*)
STOCK FUNDS
Aim Global Financial Services A (GFSAX) -2.47 18.80
Icon Financial (ICFSX) 6.50 55.67
Mutual Financial Senses A (TFSIX) 13.76 48.72
T. Rowe Price Financial Services (PRISX) 0.14 27.83
Morgan Stanley Finan. Services (B FSVBX) -0.15 30.56
3-Year 5-Year
Fund Name (Ticker) Total Total
Return(*) Return(*)
STOCK FUNDS
Aim Global Financial Services A (GFSAX) 14.27 19.82
Icon Financial ([CFSX) 12.91 N/A
Mutual Financial Senses A (TFSIX) 12.51 N/A
T. Rowe Price Financial Services (PRISX) 10.45 N/A
Morgan Stanley Finan. Services (B FSVBX) 9.72 N/A
Toll-Free
Fund Name (Ticker) Number
STOCK FUNDS
Aim Global Financial Services A (GFSAX) 800-959-4246
Icon Financial ([CFSX) 800-764-0442
Mutual Financial Senses A (TFSIX) 800-342-5236
T. Rowe Price Financial Services (PRISX) 800-638-6660
Morgan Stanley Finan. Services (B FSVBX) 800-869-6397
Minimum
Fund Name (Ticker) Initial Investment
STOCK FUNDS
Aim Global Financial Services A (GFSAX) $ 500
Icon Financial ([CFSX) 1,000
Mutual Financial Senses A (TFSIX) 1,000
T. Rowe Price Financial Services (PRISX) 2,500
Morgan Stanley Finan. Services (B FSVBX) 1,000
(*) Ranked by three-year total returns as of June 30, 2001.
Source: Morningstar Inc.
Bottom Financial Services Mutual Funds
Year-to- 1-Year
Fund Name (Ticker) Date Total
Return(*)
STOCK FUNDS
Banc Stock Group A (BANCX) 17.30 55.06
Rydex Financial Services Inv (RYFIX) -6.23 16.08
Brinson Financial Services Grth A (PREAX) -2.78 23.00
John Hancock Regional Bank B (FRBFX) 4.63 43.42
Rydex Banking Adv (RYKAX) 1.93 30.60
3-Year 5-Year
Fund Name (Ticker) Total Total
Return(*) Return(*)
STOCK FUNDS
Banc Stock Group A (BANCX) 1.34 N/A
Rydex Financial Services Inv (RYFIX) 1.25 N/A
Brinson Financial Services Grth A (PREAX) 0.99 14.37
John Hancock Regional Bank B (FRBFX) 0.66 14.81
Rydex Banking Adv (RYKAX) -5.49 N/A
Toll-Free Minimum
Fund Name (Ticker) Number Initial
Investment
STOCK FUNDS
Banc Stock Group A (BANCX) 888-226-5595 $ 2,500
Rydex Financial Services Inv (RYRX) 800-820-0888 25,000
Brinson Financial Services Grth A (PREAX) 800-647-1568 1,000
John Hancock Regional Bank B (FRBFX) 800-225-5291 1,000
Rydex Banking Adv (RYKAX) 800-820-0888 25,000
(*) Ranked by three-year total returns as of June 30, 2001.
Source: Morningstar Inc.
Our top performer, the AIM Global Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. A Fund (GFSAX) managed a solid 14.3% average annual total return over the previous three years and an impressive 19.8% over five years. As of our screening earlier this year, the fund had sputtered in 2001 with 2.5%, although it still carries Morningstar's highest rating of five stars. Nos. 2 and 3 might be good bets as well, Icon Financial (ICFSX) and Mutual Financial Services A (TFSIX), have both logged average annual returns of more than 12.5% over the past three years and were up in 2001. Icon has a five-star rating while Mutual has four stars from Morningstar. |
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