Non-Retirement: Small Cap Blend Mutual Fund

Wylie Pick: Dreyfus Small Cap Stock Index DISSX

Selecting from mutual funds available through Etrade with no load or transaction fee and an initial $2500 investment or lower minimum and subsequent $100 or lower minimums, when looking for a Small Cap Blend fund, I use the Mutual fund screener to screen out options with 3, 4, or 5 stars and find a number of choices. money

There are a few index funds and a number of actively managed funds two of which are recommend by Etrade. Like the Mid Cap Blend pick, I am going to pick an index fund in the Small Cap category for a couple of reasons. The Small Cap Growth and Value picks are both actively managed so if Wylie were to actually buy these funds, an index fund would be a good diversification next to these. money

More importantly, the managed funds are more expensive, generate more tax exposure and have not consistently out-performed to overcome these negatives. money

Allow me to illustrate:


The expenses and the turnover of the Index fund are less than half those of the two actively managed funds. money

When you use Yahoo charts to look at the year to date performance of these three funds, the index fund (blue) is off to a rough start. It is upu for the year, but trailing the competition.


Jump back to mid 2002 and buy in and the index fund actually comes out ahead. money


Looking at the performance record, each fund has underperformed the other two during one of the periods over 1, 3 and 5 years. money

Given the solid long term record, lower expenses and turnover, Dreyfus Small Cap Stock Index is the Wylie pick. money