Let's take a look at the returns of the average health care mutual fund versus both the DJIA and the S&P 500 over the last 25 January's.
| Year | Avg. Healthcare Fund | DJIA | S&P 500 |
| 1987 | 12.28% | 13.82% | 13.47% |
| 1988 | 6.26% | 1.09% | 4.21% |
| 1989 | 6.69% | 8.28% | 7.32% |
| 1990 | -6.15% | -5.72% | -6.71% |
| 1991 | 8.00% | 4.08% | 4.36% |
| 1992 | 1.64% | 1.83% | -1.86% |
| 1993 | -2.99% | 0.33% | 0.84% |
| 1994 | 5.96% | 6.06% | 3.40% |
| 1995 | 3.66% | 0.33% | 2.59% |
| 1996 | 4.95% | 5.51% | 3.40% |
| 1997 | 5.37% | 5.70% | 6.25% |
| 1998 | 2.43% | 0.01% | 1.10% |
| 1999 | 1.14% | 1.97% | 4.18% |
| 2000 | 9.82% | -4.80% | -5.02% |
| 2001 | -7.24% | 1.02% | 3.55% |
| 2002 | -6.19% | -0.90% | -1.45% |
| 2003 | -0.08% | -3.32% | -2.62% |
| 2004 | 4.19% | 0.45% | 1.83% |
| 2005 | -3.76% | -2.59% | -2.43% |
| 2006 | 2.90% | 1.50% | 2.65% |
| 2007 | 3.04% | 1.40% | 1.51% |
| 2008 | -5.01% | -4.48% | -5.99% |
| 2009 | -0.85% | -8.65% | -8.43% |
| 2010 | 0.35% | -3.32% | -3.59% |
| 2011 | 1.45% | 2.85% | 2.37% |
As you can see the performance for the month of January over the past 25 years has been strong for both the average health care mutual fund and the domestic stock markets. Both the DJIA and the average health care fund have posted positive returns in 17 of the past 25 January's. While the S&P 500 has posted positive returns in 16 of the past 25 January's.
With the markets overall performance so strong in the month of January it should be noted that most sectors have faired pretty well, but not nearly as well as the average health care mutual fund. Though January has been fairly good to most sectors and the overall market the past 25 years, my research did yield interesting weakness in the average performance of equity energy mutual funds. Over the past 25 January's the average energy equity fund has only posted positive returns 11 times. In fact, in a stretch of January's from 1998 to 2003 the average equity energy fund posted negative returns every single Janaury. I do not believe the data is strong enough to suggest a short, but it should at least encourage one to pause before building a new position in a broad-based energy equity portfolio prior to the new year beginning.
If you feel the overall market is the place you want to be in the month of January, then it may be wise to consider a position in health care. The Vanguard Health Care ETF (VHT) is an excellent choice to gain this exposure, and has done a fairly good job simulating the performance of the very well-managed Vanguard Health Care managed mutual fund.
Good luck everyone!
Jon R. Orcutt, founder of Allocation For Life, is an asset allocation strategist and author of “Master the Markets with Mutual Funds: A Common Sense Guide To Investing Success”
