After a year in which the market edged up but most fund and ETF investors took a hit, hope can be hard to find. But analysts are optimistic.
What investors may remember most about 2011 is how they wish they could forget it.
With few exceptions, the first year after the "lost decade" for U.S. stocks was also lost. And there's wariness that 2012, while ultimately better for stock investors than 2011, will present more investment obstacles than opportunities.
Investors in stock mutual funds and exchange-traded funds have earned the right to be cautious about U.S. stocks, given that for more than 10 years stocks have earned little for them.
"While (2011) hasn't been among the worst, investors probably feel like it has," said Sam Stovall, the chief equity strategist at S&P Capital IQ.
The Standard & Poor's 500 Index ($INX) was essentially flat for the year -- officially it lost 0.0028%, or three-thousandths of 1%. On a total return basis, where dividends are included, the index was up 2.1%.
A strong 11.5% fourth-quarter S&P 500 rally almost pushed a volatile year into the black. Even still, the quarter was the U.S. benchmark's best since 1999.
A popular U.S. stock exchange-traded fund, SPDR S&P 500 (SPY, news), which tracks the S&P 500, gained 1.2% for the year and 10.9% in the final 13 weeks. The biggest S&P 500 index fund, Vanguard 500 Index Investor (VFINX), added 2% for the year and 11.8% in the quarter, including dividends.
For investors who focused on the 30 stocks in the Dow Jones Industrial Average ($INDU), the year would have been gift-wrapped.
The dividend-rich Dow rose 5.5% in 2011; a representative Dow-tracking ETF, the SPDR Dow Jones Industrial Average ETF (DIA) -- aka Dow "Diamonds" -- gained 7.7% on a total return basis.
Dividends, in fact, made all the difference to U.S. investors' results in 2011.
Standouts among dividend-centered ETFs included WisdomTree Dividend ex-Financials (DTN, news), gaining 11.9%; iShares Dow Jones Select Dividend (DVY, news), up 11.7%; PowerShares Dividend Achievers (PFM, news), up 9.1%, the SPDR S&P Dividend (SDY, news), up 7.1%; and Vanguard Dividend Appreciation ETF (VIG), which rose 6.1%.
Investors in actively run stock mutual funds weren't so lucky. Diversified U.S. equity funds lost more than 2% on average in 2011, according to preliminary data from investment researcher Morningstar. A fourth-quarter rebound of 12.2% saved the year.
Among widely owned funds, American Funds Growth Fund of America (AGTHX) lost 4.9%, Dodge & Cox Stock (DODGX) shed 4.1%, while Fidelity Contrafund (FCNTX) was essentially flat, down 0.1%.
Indeed, besides stock funds with hefty dividends, there weren't too many places for shareholders to hide, other than perhaps market-neutral funds, which tend to follow lower-volatility strategies and turned in a flat performance for the year.
So-called bear-market funds, which are designed to gain when stocks are weak, failed to live up to the billing, losing 10% on the year. Precious-metals funds lost 23% as slower economic growth and parts of Europe on the brink of recession pulled the plug on risk-taking.
Gold also lost its glitter. The largest gold ETF, SPDR Gold Shares (GLD, news), rose 9.6% for the year, but it tumbled 10.7% in December alone and was showing continued weakness heading into this year.
Sector investors tended to fare better. Seven of 10 S&P 500 sectors made meaningful gains in 2011. Utilities, consumer staples and health care led the way, up 14.8%, 10.5% and 10.2%, respectively, excluding dividends.
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