Microsoft has recorded a slight gain over the past three years, but has demonstrated substantial volatility. The company rose dramatically in 2007, fell sharply in 2008 and has recovered strongly since. The mutual fund as had by far the most stable performance. The fund is slightly down over the three-year period and has been down for most of that time. However, for most of 2009 the mutual fund was performing well above Microsoft and the Dow. The Dow is the poorest performer of the three, demonstrating surprising volatility during that period. The Dow is down more than 10% in the past three years.
This performance must also be measured against the expected performance in order to conduct a proper evaluation. Microsofts outperformance of the market, for example, represents a strong performance relative to the market. The companys stock has a beta of 0.97, meaning that the expectation is that Microsoft will trade almost in line with the Dow. That it has significantly outperformed the Dow means that the performance of Microsofts stock has exceeded expectations.
The mutual fund has a beta of 0.77. This means that its relative lack of volatility is expected. The fund has a high proportion of debt securities and cash. With just 20% equity, a beta of 0.77 actually seems high.
The funds performance is superior to that of the Dow, however. Given the Dows performance and the funds beta, a decline in the range of 7% would be expected and the fund has outperformed that.
Overall, the Fidelity Asset Manager 20% has performed fairly well. The funds high level of debt and money market has allowed it to weather the recent economic downturn fairly well, and indeed the fund has almost recovered from its starting point three months ago and its nadir in early January 2009. The fund failed to outperform Microsoft, which itself significantly outperformed market expectations. This indicates that even though the software giant has a greater percentage of its assets held in cash, it is still able to generate so much money from what it does have invested that it can outperform anyway.
For Fidelity, if the fund goes back to its prescribed asset allocation, then the cash component will increase. This will increase the stability of the fund, but it will not generate significant return for the fund. Unlike Microsoft this funds other activity will not be sufficient to proper it to superior performance, given its high orientation towards debt products.
Fidelty.com. (2010). Retrieved April 24,.