Mutual funds took it on the chin in 1987. The stock market plunge Oct. 19 wiped out most of the funds' profits for 1987, leaving them with either losses or tiny gains. Only a few turned in strong showings.
Gold funds were the clear winners for 1987, rising 35.7 percent, despite a severe drubbing in the fourth quarter. Gold funds prosper in times of economic uncertainty.
International stock funds moved up 13.9 percent and world income funds moved up 20.8 percent for 1987. The world income group included funds that profited from the dollar's drop by holding foreign currencies.
The losers' list was far longer.
The 659 general stock funds monitored by Michael Lipper, president of Lipper Analytical Services, closed the year with a gain of 0.47 percent after suffering a 20.4 percent decline in the fourth quarter. By comparison, the same funds were up 27.2 percent for the nine months ending in September.
Small-company growth funds, which have spent several years in the doldrums, were down 5.9 percent for 1987, while utility funds were down 7.7 percent.
The market collapse, Lipper said, "should have cured both individual and corporate investors from any belief that there are riskless investment strategies."
Investors in bond funds, he said, "learned the hard way that there is a big difference between 'guaranteed' savings deposits and interest-rate-sensitive long-term investments."
Three Washington area funds turned in these performances for the year (Y) and quarter (Q):
Growth Fund of Washington, Johnston, Lemon & Co., up 4.26 percent (Y), down 17.5 percent (Q). Washington Area Growth Fund, Calvert Group, down 8.76 percent (Y), down 22.89 percent (Q). Southeastern Growth Fund, Wheat, First Securities, down 9.89 percent (Y), down 25.25 percent (Q).
The post-collapse slide in interest rates, which sent bond prices higher, showed how quickly losers can become winners and vice versa. The Benham Target 2010 and Benham Target 2015 funds, which invest in zero coupon bonds, topped the losers' list in the third quarter with about 20 percent losses. In the fourth quarter, the two funds showed 25 percent gains. However, they had 15 percent to 20 percent losses for the year.
The top gainer for 1987 and the last quarter was the $5 million Oppenheimer Ninety-Ten fund, which keeps 90 percent of its cash in money market investments and 10 percent in options. Jon Fossel, president of Oppenheimer Management Corp. said the fund bought calls -- bets that the market would go up -- during the early part of the year and bought puts -- bets the market would go down -- shortly before the collapse. Both bets paid off, giving the Ninety-Ten Fund a 93.5 percent gain for 1987 and a 43.19 percent gain for the fourth quarter.
The losers' lists for the year and the quarter included a number of Fidelity Investments' "Select" funds, which invest in specific industries.
Here are the Lipper percentage changes by fund categories for the year and quarter:
Capital appreciation, up 1.5 (Y), down 21.4 (Q); growth, up 1.2 (Y), down 21.9 (Q); small company growth, down 5.9 (Y); down 24.8 (Q); growth and income, up 1.5 (Y), down 18.0 (Q); equity-income, down 2.5 (Y), down 14.1 (Q).
Health, down 2.7 (Y), down 25.6 (Q); natural resources, up 4.9 (Y), down 23.9 (Q); science and technology, up 2.2 (Y), down 25.7 (Q); utilities, down 7.7 (Y), down 7.6 (Q); specialty, down 3.8 (Y), down 21.5 (Q).
Global, up 5.6 (Y) down 19.1 (Q); international, up 13.9 (Y), down 17.4 (Q); gold, up 35.7 (Y), down 21.7 (Q); option growth, up 31.1 (Y), up 0.76 (Q); option income, down 1.2 (Y), down 16.5 (Q).
Convertibles, down 5.9 (Y), down 16.2 (Q); balanced, up 2.6 (Y), down 10.6 (Q); income, down 0.43 (Y), down 3.2 (Q); world income, up 20.8 (Y), up 10.7 (Q); fixed income, up 1.3 (Y), up 3.3 (Q).