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Is DFA Continental Small Company I (DFCSX) a Strong Mutual Fund Pick Right Now?

Europe - Equity fund seekers should not consider taking a look at DFA Continental Small Company I (DFCSX) at this time. DFCSX has a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

DFCSX is part of the Europe - Equity section, a segment that boasts an array of many different selections. Europe - Equity mutual funds are known for investing their assets in stocks based in countries like Great Britain, Germany, France, Italy, and Spain; these funds provide slow growth that can offer great levels of stability.

History of Fund/Manager

DFCSX finds itself in the Dimensional family, based out of Austin, TX. DFA Continental Small Company I debuted in April of 1988. Since then, DFCSX has accumulated assets of about $767.24 million, according to the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 3.38%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.74%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. DFCSX's standard deviation over the past three years is 14.43% compared to the category average of 12.73%. Looking at the past 5 years, the fund's standard deviation is 13.65% compared to the category average of 12.52%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In DFCSX's case, the fund lost 61.77% in the most recent bear market and underperformed its peer group by 3.25%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 0.84, so it is likely going to be less volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. DFCSX has generated a negative alpha over the past five years of -3.16, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, DFCSX is a no load fund. It has an expense ratio of 0.54% compared to the category average of 1.37%. Looking at the fund from a cost perspective, DFCSX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.

Bottom Line

Overall, DFA Continental Small Company I ( DFCSX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, DFA Continental Small Company I ( DFCSX ) looks like a somewhat weak choice for investors right now.

For additional information on the Europe - Equity area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into DFCSX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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