In the battle of good and evil, evil is winning -- at least in the mutual fund world, over the past year, and when you compare the results of these three funds:
- The Noah Fund (FUND:NOAHX), which invests according to religious views
- The Timothy Large/Mid-Cap Growth Fund (FUND:TLGAX), which does the same
- The Vice Fund (FUND:VICEX), which invests in. bad stuff
Here are some more details, comparing the funds with the S&P 500, the performance of which you could roughly match via an index fund:
| 2003 return | 3-yr. return | Expense ratio | |
|---|---|---|---|
| Noah | 25.1% | -3.31% | 2.2% |
| Timothy | 20.0 | -5.82 | 1.6 |
| Vice | 34.3 | N/A | 1.75 |
| S&P 500* | 28.5 | -0.84 | 0.18 |
What conclusions might investors draw from this? Well, for starters, they might assume that Vice investing is the way to go. But they'd probably be wrong -- because these results are short-term ones and therefore not too meaningful. 2003 might just have been a good year for vice. It happens.
One thing to notice is the kind of expense ratio that the good and evil funds sport. Realize that whatever you're aiming to earn via an investment in these funds will be reduced by the expense ratio each year. Making matters worse, the Noah fund has a front-end load of 5.5%, which means it eats up 5.5% of your initial investment at the outset. Invest $5,000? Whoops, it's $4,725 now -- the fund just stuffed $275 into its pockets when you deposited your money.
Look at the specific holdings of the funds and you might scratch your head a little, too. The Vice fund invests in Anheuser-Busch (NYSE:BUD) and Shuffle Master (NASDAQ:SHFL), among others. Sure, many people abuse alcohol and gambling, but for many of us, isn't a beer and a shuffled deck of cards or a few dollars spent at a casino not such a big deal? Meanwhile, the Noah fund invests in Wal-Mart (NYSE:WMT), which despite bringing low prices to America, has also got some hands wringing about its possible sins. It's also invested in Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), and Dell (NASDAQ:DELL) -- companies without which people would have trouble accessing online gambling and worse things.
So what's a Fool to do? Consider the good old glorious index fund -- learn more about it in our Mutual Fund Center.
And if you'd like to be introduced to some promising mutual funds with outstanding records, check out our new newsletter, MotleyFoolChampion Funds.
Longtime Fool contributor Selena Maranjian owns shares of Microsoft.
