Hem's a novel way to beat the stock market: Buy brand-new mutual funds, hold them for a year and then dump them. As a rule, we advise finding good funds―as proven by long-standing performance records―and holding on for the long pull. But every rule has exceptions. Had you shuffled through new funds the last two decades at Fidelity Investments, you would have made a pile of money. From April 1983 through April 2003 the Boston powerhouse launched 47 diversified domestic equity funds; of those, 30 beat the S&P 500 in their first 12 months. Overall, Fidelity's new funds, including the losers, returned an average annual 17.8% in their first year. That is 6.6 percentage points more than the average return on 47 hypothetical investments in the S&P 500 made simultaneously with each Fidelity newbie. Note: After that first year returns are less stellar. But taken as a group after the first 12 months and held through April 2004, the Fidelity funds still beat the market. The 47 annual returns averaged out to 9.9% (pardon the long-winded arithmetic), 3.1 points better than the average of the annualized returns from hypothetical market holdings.
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