So, not much happened this past year for fund investors, right? It might seem that way, after many mutual funds and exchange-traded funds ended the year close to where they began. But that belies the scary ride up, down and back up again.
Here’s a look at how funds performed over the year:
U.S. stock funds: Many U.S. stock funds did virtually nothing in 2015. They just took a lot of sharp turns to get there. The largest stock fund by assets returned 1.2 percent for the year, as of Dec. 30.
Vanguard’s Total Stock Market Index fund tracks the performance of a broad U.S. stock market index, and it got back to positive for the year only after plunging 7.3 percent during the third quarter. A wave of selling hit markets around the world in August, propelled by fears that China’s economic slowdown was turning out to be worse than feared.
S&P 500 index funds lost 10 percent over the span of just a week, their first drop of that magnitude in about four years. It was a cold slap for investors who had gotten used to years of relatively placid returns from their stock funds.
Growth versus value: When something’s rare, everyone wants it. And what’s scarce in this still-tepid global economy is strong growth.
Netflix was by far the best stock in the S&P 500 during 2015, more than doubling in price, because it consistently produces revenue growth of more than 20 percent. Compare that with the rest of the S&P 500, where analysts say revenue fell in 2015. The average large-cap growth stock fund returned 4.6 percent, including dividends. That compares with a loss of 3.2 percent for large-cap value stock funds. It’s the fifth time in seven years that growth stocks have topped value stocks.
Foreign stock funds: International stock funds have been some of the most popular investments. The return on that investment was hit and miss in 2015.
Funds that focus on stocks from emerging markets were some of the year’s worst performers, losing an average of 13.8 percent. At the center of the disappointment was China, whose growth is skidding as the government tries to remake the economy into one dependent on consumer spending instead of heavy industry.
On the other side were Japanese stock funds, which returned an average of 12.7 percent. A weak yen has helped fuel stronger profits for Japanese exporters. And the Bank of Japan is pushing stimulus to help its economy.
High-quality bond funds: D-Day arrived for bond-fund investors Dec. 16, when the Fed announced the first increase in short-term rates in a decade.
Investors had spent years fretting about it. Higher rates tend to cause the price of bonds currently in fund portfolios to fall.
Many bond funds did turn in losses for 2015, but they were mostly modest. The largest category of bond funds, ones focused on intermediate-term bonds, lost an average of 0.4 percent.
Although the Fed has begun raising rates, most investors expect it to move gradually. Another traditional challenge for bond investors, inflation, remains low.
