Use this screen to find foreign funds that stayed calm amid rough waters.
The market meltdown in 2008 and the sharp reversal that followed during most of last year have made for an exceptionally volatile three-year period for global equity funds. And in most cases, last year's strong returns haven't erased the pain of the sell-off. On average, foreign large-cap funds were down 44% in 2008 and gained 33% in 2009. The group averaged a loss of 6% per year for the past three years.
The 10-year picture for foreign large-cap funds is rosier but certainly not mind-blowing. That's because the trailing 10-year period now begins with the 2000-02 bear market (when many funds posted double-digit losses during each calendar year) in addition to 2008's downturn and excludes the red-hot gains of 1999. So the typical foreign large-cap returned roughly 2% per year during the past decade.
Morningstar Principia can point to funds that bested that 2% annualized gain during the past 10 years and provided a smoother ride, particularly as markets have seesawed during the past three years.
To begin the screen, focus on foreign large-cap funds that sport reasonable price tags and are open to new investors.
Special Criteria = Distinct Portfolios Only
And ( Morningstar category = Foreign Large Value
Or Morningstar category = Foreign Large Blend
Or Morningstar category = Foreign Large Growth )
And Audited expense ratio < = 1.50
And Purchase Contraints NOT= Closed-New Investment
The screen is also set to pull funds that rank in the top third of their respective categories for the trailing three years and that sported lower volatility (as measured by standard deviation) than Vanguard Total International Stock Index
And % Rank Cat 3 Yr < = 33
And Std Dev 3 Yr < 26
The longer-term stress test starts with requiring 10-year annualized returns of 2% or more.