The Danger Zone Pick: 10/29/12

Check out my latest Danger Zone interview with Chuck Jaffe of MarketWatch.com.

This week all Small Cap funds are in the Danger Zone.

25% of small cap stocks get my Attractive or better rating, though 0 ETFs and mutual funds get an Attractive or better rating.
82% of ETFs and 92% of ETF assets get a Dangerous rating.
68% of mutual funds and 68% of mutual fund assets get my Dangerous rating.

There are plenty of good small cap cap stocks out there. PMs are not finding them and ETFs are not allocating to them.

This issue speaks directly to the lack of research and resources focused on creating funds with good stocks.
Lots of emphasis on cheap funds, lower-cost funds can dupe investors. But no matter how low the costs of a fund, it will perform well only if the stocks it holds perform well.

Costs do not drive performance, only holdings. Need to have good stocks and low costs to be successful. Not one or the other, but both.

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