R4| Monday, March 9, 2020 THE WALL STREET JOURNAL.
JOURNAL REPORT |INVESTING IN FUNDS & ETFS
Stock & Bond Benchmark Indexes All total return unless noted
Perfomance (%)
Investment objective February YTD 1-yr 5-yr*
Large-capstocks
DJIA –9.8 –10.6 0.4 9.6
S&P 500 –8.2 –8.3 8.2 9.2
Midcapstocks
S&P MidCap 400 –9.5 –11.9 –3.4 5.5
Small-capstocks
Russell 2000 –8.4 –11.4 –4.9 5.1
Broadstockmarket
DJ U.S. Total Stock Market –8.2 –8.3 6.8 8.7
Russell 3000 –8.2 –8.3 6.9 8.7Performance (%)
Investment objective February YTD 1-yr 5-yr*
Stockindexes
DJ U.S. TSM Growth –6.8 –4.8 13.5 10.8
DJ U.S. TSM Value –9.8 –12.1 –0.5 6.4
Taxablebonds
BarclaysAgg. Bond 1.8 3.8 11.7 3.6
Municipalbonds
BarclaysMuni. Bond 1.3 3.1 9.5 4.0
Internationalstocks
MSCI EAFE††(price return) –9.2 –11.2 –3.4 –0.8
Dow Jones World (ex. U.S.) –8.0 –10.4 –0.6 2.5
*Annualized †Diversifiedfundsonly **Excludesmoney-marketfunds ††Europe,Australia,FarEastMONTHLY MONITOR
WILLIAM POWERFebruaryWas
NoGreatLeap
ISTOCKNEED TO KNOW
BYNICKRAVODRIPs Survive
In a No-FeeWorld
Many investors still like
the circular experience
of dividend reinvestingThanks to the mar-
ket’s coronavirus jolt
toward the end of the
month, February was
brutal for stock-fund
investors. March has started out
more positively, even though it
might not feel that way: Stocks are
up modestly for the month so far,
after the Dow’s two 1,000-point-plus
rallies were mostly wiped out by
subsequent declines.
U.S.-stock funds fell an average
8.4% in February, according to Thom-
son Reuters Lipper data, which
means a two-month drop of 9.5% to
start 2020. International-stock funds
didn’t do much better, with a 7.2%
monthly decline in February, and a
9.6% drop for the first two months.
Some strategists are saying the
coronavirus-triggered declines could
turn out to be a short-term interrup-
tion for the markets, which hit their
latest highs in mid-February and
were due for a pullback anyway.
“The market did want to take a
breather. It has now taken that
breather,” says Jim Tierney, chief in-
vestment officer of concentrated
U.S. growth at AllianceBernstein in
New York. He says low interest rates
are forcing investors into stocks
whether they like it or not. “So,” he
says, “how in the world can I get a
mid-single-digit return if I’m not in
equities?”
Investors will return to cyclical
stocks, rather than being defensive,
as virus concerns wane, says Brent
Schutte, chief investment strategist
of Northwestern Mutual Wealth
Management in Milwaukee.
“The important thing is that go-
ing into this, the global economy
was strengthening, and you had a
bunch of fiscal stimulus,” he says. “If
you think that global growth acceler-
ates in the future, you’d want to in-
vest more in cyclical assets, which is
still our base outlook.”
Surprisingly, in light of the coro-
navirus epidemic, emerging-markets
funds held up better than U.S.
stocks in February—down only 3.9%.
One reason, says Mr. Schutte, is
that the number of Chinese new
cases has drawn down in recent
weeks, so “investors reacted by not
selling that asset class” as the crisis
moved to developed markets. (More
on emerging markets, page R7.)
Bond funds rose in February, be-
fore the rate cut by the Fed on
March 3. Funds tied to intermediate-
maturity, investment-grade debt (the
most common type of fixed-income
fund) rose 1.4% in February, to put
the two-month gain at 3.4%.Mr. Poweris a Wall Street Journal
news editor in South Brunswick, N.J.
Email him [email protected].I
n the brave new world of
commission-free online
stock trading, many invest-
ment professionals saycom-
pany-sponsored dividend-re-
investment plans, or DRIPs,
have outlived their usefulness.
Yet these plans—which enable
individual investors to buy stock,
even fractional shares, directly
from an issuer and have the divi-
dends automatically reinvested to
buy more of the same stock com-
mission-free and sometimes at a
small discount—remain surpris-
ingly popular.
More than 1,000 companies
now offer some kind of DRIP/di-
rect-purchase plan, double the
amount of a decade or so ago, ac-
cording to DRIP Investor, an in-
dustry newsletter.
Roughly 500 are traditional
DRIP and direct-purchase
plans, while about 300 are
online-only plans, where,
often for a fee, investors
can buy through transfer
agents such as Computer-
share, as well as in an indi-
vidual retirement account.
About 250 are direct-pur-
chase plans tied to foreign
stocks known as American
depositary receipts, accord-
ing to the DRIP newsletter.
So, what is behind the
appeal of DRIPs when on-
line-trading commissions
have all but vanished and
many brokers now allow
free dividend reinvest-
ments?
Charles Carlson, who
publishes the DRIP news-
letter, says the growth in
dividend-reinvestment
plans has come as those
new to investing seek low-
cost ways to invest small
amounts of money, and
some companies make
their programs cheaper
and easier to access. There
also may be a large behav-
ioral component to the
popularity of DRIPs, he and
others say.
“There is still a large
number of investors who
don’t want to trade online
for myriad reasons: [They]
don’t trust online activity,”don’t want to bother with a
computer, etc., Mr. Carlson says.
He also notes that the new
world of no-commission invest-
ing isn’t universal; for example,
calling in trades to a broker will
still result in a fee, he says.Better ways to invest?
Cassandra Toroian, founder of
Bell Rock Capital in Rehoboth
Beach, Del., says millions of in-
vestors who have participated
in DRIP programs over the
years not only are used to the
process, they have had positive
results.
“For many long-term, buy-
and-hold investors who plan to
hold a stock for decades, a DRIP
may still make sense since it
keeps the investor disciplined,”
Ms. Toroian says. What’s more,
she says, companies that offer
DRIPs are sending a message to
their shareholders: “They are all
about cash management, long-
term steady growth, and want
long-term shareholders versus
day traders, for example, whocan introduce tremendous vola-
tility into a stock.”
Still, DRIPs today have many
detractors, including Laurie It-
kin, an adviser with Coastwise
Capital Group in La Jolla, Calif.
She echoes the feeling of
many investment pros when she
says, “There is no compelling
reason to engage in dividend re-
investment in the new age of
zero-commission trading.”
These advisers say there are
other downsides associated
with DRIPs, including the book-
keeping hassles and tax head-aches that go along with using
dividends to make many small
purchases of stock over long pe-
riods, as well as potential fees
that some companies charge to
set up and exit their programs.
Other pros simply believe there
have always been better ways to
invest.
“My argument against DRIPs
is that investors may want to
use the money from dividendsto rebalance and diversify their
portfolio and avoid unnecessary
concentration in the same stock,”
says Stoyan Panayotov, senior
adviser and founder of Babylon
Wealth Management in San Fran-
cisco and Walnut Creek, Calif.Appeal of discounts
DRIP devotees counter that frac-
tional share purchases for indi-
vidual stocks, which have always
been a compelling feature of
DRIP investing, are still uncom-
mon at the major discount bro-
kers. Moreover, DRIPs also often
have no account minimums and
there is minimal paperwork re-
quired to set up a plan and start
investing. Thus, for many people
DRIPs are less intimidating than
using a broker, online or in per-
son, they says.
Further, in a small number of
plans, an investor can still buy a
stock at a discount, usually 3% to
5%. These discounts apply mostly
to reinvested dividends but, in
rare cases, can apply to optional
additional investments, as well.
“You can’t buy stock 95 cents
on the dollar at Schwab,” Mr.
Carlson says.Mr. Ravois a writer in Seattle.
Hecanbereachedat
[email protected].Detractors say
DRIPs have their
downsides,
including
potential fees.Mutual-Fund Yardsticks: How Fund Categories Stack Up
Includes mutual funds and ETFs for periods ended Feb. 28. All data are final.
Perfomance (%)
Investment objective February YTD 1-yr 5-yr*
Diversifiedstock& stock/bond funds
Large-CapCore –8.1 –8.3 6.8 7.8
Large-CapGrowth –6.3 –4.1 12.9 11.0
Large-CapValue –9.6 –12.3 –0.1 4.9
Midcap Core -9.0 –10.7 –0.6 4.0
Midcap Growth –6.3 –4.9 8.3 8.9
Midcap Value –10.3 –13.3 –5.2 2.6
Small-CapCore –9.6 –12.9 –6.9 3.6
Small-CapGrowth –6.8 –6.7 1.1 7.7
Small-CapValue –10.3 –15.5 –11.9 1.8
MulticapCore –8.0 –8.7 4.3 6.4
MulticapGrowth –5.9 –4.0 9.9 9.4
MulticapValue –9.7 –12.5 –2.6 4.0
Equity Income –9.1 –10.9 0.8 5.3
S&P 500 Funds –8.3 –8.3 7.7 8.7
SpecialtyDivers. Equity –8.9 –7.9 6.3 8.9
Balanced –4.3 –4.3 5.8 4.6
Stock/BondBlend –4.7 –5.0 4.9 4.3
Avg. U.S. Stock Fund† –8.4 –9.5 1.9 6.3
Sectorstockfunds
Science & Technology –5.7 –3.7 13.2 14.3
Telecommunication –3.9 –4.5 5.9 4.3
Health/Biotechnology –4.2 –7.1 3.7 5.2
Utility –9.0 –4.8 8.4 7.5
Natural Resources –12.8 –21.6 –26.3 –11.5
Sector –7.0 –6.6 3.6 4.0
Real Estate –7.0 –5.8 6.7 4.8Performance (%)
Investment objective February YTD 1-yr 5-yr*
Worldstockfunds
Global –7.1 –8.0 4.1 5.4
International(ex-U.S.) –7.2 –9.6 1.2 2.2
EuropeanRegion –8.0 –10.2 1.7 1.9
EmergingMarkets –4.9 –8.9 0.6 2.5
Latin American –11.1 –14.5 –4.5 3.1
Pacific Region –2.0 –6.3 3.3 4.5
Gold Oriented –9.2 –10.0 16.6 4.5
Global Equity Income –7.9 –9.6 1.0 3.4
InternationalEquity Income –8.0 –10.5 –1.2 1.1
Taxable-bondfunds
Short-Term 0.5 1.1 4.5 2.0
Long-Term 1.2 3.7 14.4 4.3
IntermediateBond 1.4 3.4 10.8 3.3
IntermediateU.S. 0.9 2.5 8.3 2.2
Short-TermU.S. 1.4 3.4 10.8 3.3
Long-TermU.S. 3.0 6.2 14.4 3.2
General U.S. Taxable 0.6 2.3 10.1 3.9
High-YieldTaxable –1.6 –1.6 5.4 4.2
Mortgage 1.0 1.9 7.3 2.5
World Bond –1.0 –0.3 6.0 3.0
Avg. Taxable-BondFund** 0.1 1.2 7.2 2.9
Municipal-bondfunds
Short-TermMuni 0.8 1.4 4.2 1.3
IntermediateMuni 1.0 2.6 7.5 2.9
General & Insured Muni 1.5 3.4 9.9 3.9
High-YieldMuni 1.8 3.8 11.6 5.2Data provided byHow the Largest Funds Fared
Performance numbers are total returns (changes in net asset values with reinvested distributions) as of
Feb. 28; assets are as of Jan. 31. All data are final.Stock Mutual Funds and ETFs
Total Return (%)
Assets Annualized
Fund Ticker ($ billions) February 1-year 3-year 5-year 10-year
VanguardTSM Idx;Adm VTSAX 901.68 –8.2 6.8 9.3 8.7 12.5
Vanguard500 Idx;Adm VFIAX 543.10 –8.2 8.2 9.8 9.2 12.6
VanguardTot I S;Inv VGTSX 411.52 –6.7 0.1 4.2 2.5 4.5
SPDR S&P 500 ETF SPY 307.85 –8.2 8.1 9.8 9.1 12.5
VanguardInstl Indx;InsP VIIIX 240.10 –8.2 8.2 9.9 9.2 12.7
Fidelity500 IndexFund FXAIX 236.28 –8.2 8.2 9.9 9.2 N.A.
iShares:CoreS&P 500 IVV 203.36 –8.2 8.2 9.8 9.2 12.6
AmericanFundsGro;A AGTHX 200.72 –5.2 9.7 11.9 10.5 12.6
AmericanFundsEuPc;R6 RERGX 165.47 –6.2 4.5 7.0 4.2 6.3
AmericanFundsBal;A ABALX 161.11 –3.8 7.8 7.4 6.8 9.6
AmericanFundsWash;A AWSHX 126.65 –8.7 3.4 8.0 8.0 11.7
VanguardDev Mkt;ETF VEA 123.73 –7.6 0.02 4.2 2.6 5.1
FidelityContrafund FCNTX 120.80 –5.9 11.4 14.2 11.2 13.7
AmericanFundsInc;A AMECX 114.82 –5.9 4.3 4.9 4.9 8.4
VanguardMd-CpI;Adm VIMAX 113.09 –8.8 3.5 6.7 6.4 11.9
VanguardWellington;Adm VWENX 112.56 –5.3 8.9 7.7 7.2 9.5
AmericanFundsCIB;A CAIBX 107.72 –5.4 3.7 4.1 3.3 6.7
AmericanFundsFInv;A ANCFX 106.71 –6.9 6.2 8.5 8.7 11.7
VanguardGro Idx;ETF VUG 105.91 –6.5 16.8 14.8 11.4 14.3
AmericanFunds ICA;A AIVSX 101.13 –7.7 4.7 6.5 6.9 10.6Bond Mutual Funds and ETFs
Total Return (%)
Assets Annualized
Fund Ticker ($ Billions) February 1-year 3-year 5-year 10-year
VanguardTot Bd;Adm VBTLX 259.34 1.7 11.9 5.0 3.5 3.9
VanguardTot Bd II;Inv VTBIX 206.37 1.7 11.9 5.0 3.5 3.8
VanguardTot Itl BI;Adm VTABX 151.39 0.7 9.4 5.3 4.0 N.A.
PIMCO:Income;Inst PIMIX 136.42 –0.5 6.1 5.1 5.5 8.5
Met West:Total Return;I MWTIX 82.88 1.6 11.7 5.1 3.6 5.0
VanguardInt-Tm TxEx;Adm VWIUX 75.88 1.1 8.3 4.8 3.6 4.0
iShares:CoreUS Agg Bd AGG 72.72 1.8 11.6 5.0 3.5 3.9
PIMCO:TotRtn;Inst PTTRX 68.16 1.5 11.1 5.1 3.7 4.4
Dodge & Cox Income DODIX 65.22 0.9 10.3 5.0 4.0 4.6
VanguardSh-Tm Inv;Adm VFSUX 63.22 0.8 6.3 3.3 2.8 2.8
Lord AbbettSh Dur;F LDLFX 57.42 0.3 5.1 3.2 2.8 3.3
DoubleLine:TotRtn;I DBLTX 56.24 1.5 8.6 4.6 3.6 N.A.
PGIM Tot Rtn Bond;Z PDBZX 55.07 1.4 13.5 6.3 4.7 5.6
AmericanFunds Bond;A ABNDX 52.23 1.8 10.9 4.6 3.3 3.8
VanguardSh-Tm B;ETF BSV 49.75 1.0 6.3 3.0 2.2 2.1
Note:Forfundswithmultipleshareclasses,onlythe largestis shown. N.A.: Not applicable; fund is too new or data not availableData provided by