Apple’s gains make some mutual funds riskier

“When it comes to Apple, investors could become victims of their own success,” David K. Randall writes for Reuters. “t is a dilemma more mutual fund managers are wrestling with due to the company’s nearly 48 percent gain this year. Those who bought Apple well below its current price have seen the value of their investment balloon, sometimes to more than 10 percent of their fund’s assets.”

“As Apple stock has marched higher, well-timed bets on the company have helped some growth-oriented and blended mutual funds outperform the broad market. But in doing so, many of those funds have now tied investor dollars closer to the performance of a single company,” Randall writes. “This isn’t much of an issue when it comes to funds that market themselves as narrow bets on technology. But many funds whose broad holdings could be the core of a (401)k or similar retirement plan – Fidelity’s $14.7 billion Blue Chip Growth and the $28.7 billion T. Rowe Price Growth fund among them – are stocking up on Apple.”

Randall writes, “Apple makes up nearly 9 percent of Fidelity’s $80.8 billion Contrafund, for instance. The fund is the sixth-most popular holding in 401(k) plans nationwide, according to BrightScope, a firm that ranks company (401)k plans. A dramatic fall in Apple’s shares, however unlikely that may seem at the moment, would quickly ripple across the retirement accounts of millions of investors who thought they were safer investing in funds than individual shares.”

Read more in the full article here.

MacDailyNews Take: As if the fund managers can’t see what Randall describes.

Apple’s been held underwater for quite some time now. Years of Steve Jobs’ health scares, the prolonged dividend/buyback watch, general FUD, flash crash “mistakes,” etc. Look at the Forward P/E ratio for AAPL (12.24) versus, for example, Amazon (76.55). It’d be nice to allow Apple at least bob to the surface for once, grab a breath, and achieve something resembling it’s true value, wouldn’t it?


  1. Their idea of diversification is absolute bullsh*t. If you had loaded up on AAPL alone and nothing else 5 years ago, your portfolio would be worth far more today than any diversified mix that a “genius” broker could have ever come up with.

    These so called experts have never appreciated AAPL for what it truly is and they never will. Your best bet is to ignore their advice, the ones who have made the most money off of AAPL these last few years have done just that.

    1. Easily said in hindsight. If your entire portfolio is just one thing, your relationship to it will be magnified, especially when experiencing the ups and downs. Same as being married to someone. Volatile I tell ya…volatile. 😉

  2. The usual nonsense about diversification.

    Even with a 9% stake in Apple, a fund still could be well-diversified. Further, if Apple is tanking, there’s a good chance the whole market is tanking as well.

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