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Mutual Funds That Beat The Market - Part 5 (Money Market)

edited March 2014 in Fund Discussions

The last of this thread - money market funds, which tend to offer lowest risk, but with attendant lowest return over the long run. There have been times, however, when money market or "cash" has ruled, like from 1966 - 1984 when cash provided a strong 7.8% APR. Here's a reminder from Bond Fund Performance During Periods of Rising Interest Rates:

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Some observations up-front:

- There are only 500 or so money market funds.

- The earliest inception date is 1972. It belongs to American Century Capital Presv Investor CPFXX. (But it is not one of better offerings.)

- Few new money market funds have been created in recent years.

- Few MFO readers discuss them and none have been profiled. M* does not appear to rate them or provide analyst reports of money market funds.

- No money market funds have loads, but many impose 12b-1 fees. The average EP is 0.5%.

- Fortunately, none have a negative absolute return over their life times.

- There are two main categories of money market funds: taxable and tax-free. The latter have existed since 1981 and represent about a third of offerings today.

- This plot summarizes average performance for the two types compared to the T-Bill:

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- Since 1981, the annualized return for T-Bill is 5.0%. For money market funds, the average APR is 4.6% for the taxable (about the difference in average EP), and 2.9% for tax-free.

- Only 1 in 3 taxable money market funds have beaten the T-Bill over their life times. And virtually no tax-free funds have beaten, as you would expect.

Because of the strong tax dependency with these funds, I broke out this distinction in the tabulation below. Purple means the fund was a top performer relative to T-Bill over its life time, and yellow represents worst performing APR. (For the money market funds, I did not break-out top Sharpe in blue, since APR ranking relative T-Bill is fairly close to Sharpe ranking.)

Here's the break-out, by fund inception date:

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For those interested, I've posted results of this thread in an Excel file Funds That Beat The Market - Nov 12.

Comments

  • Dear Charles: Nice work on all five parts of "Mutual Funds That Beat The Market".
    Regards,
    Ted
  • edited January 2013
    Reply to @Ted: Thanks Ted. I enjoyed it...and will blame MJG for egging me on.

    Thinking a bit more about this last post...

    There are 9 money-market funds that actually out-performed SP500 over their life times, and 8 these were lucky enough to launch between 1999-2000, just before the tech bubble...and the subsequent financial crisis of 2008.

    American Beacon Money Market Select ASRXX is hands-down the top performing money market fund relative to SP500 over its 12+ life time...beating SP500 by nearly a percent APR. Here's the comparative growth chart from M*:

    image

    I realize that much of this relative over-performance is timing; nonetheless, if I had to choose...Schwab offers ASRXX for $1K min, institutional, and $2.5K min, investor.
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