Brigitte Werfel February 24, 2020 Mutual Fund
Seek consistency Evaluate a mutual fund`s performance beyond just the recent year. Any fund can get lucky, but it`s the rare firm that prove themselves year after year. Examining a fund`s long term performance can answer the question of consistency. If the performance was good, was it repeatable due to skill - or merely a spike due to dumb luck?
These are just two of several companies that provide ratings on these funds. Research them and take the time to evaluate the past performance before going with one of these companies for investment advice. When you rely on fund ratings to provide the needed investment information you should be sure to look at more than one ratings system. You want to follow the ratings company that has the most successful record of predicting the future potential of mutual funds.
One way around the round-trip trap is instead of buying the same fund back (because now that energy fund is going up again) is to buy a similar fund from a different mutual fund family; in other words switch from ABC fund company to XYZ, as an example.
The recent explosion of an oil rig in the Gulf and the resulting chaos and environmental damage tells you that any company can all of a sudden be exposed to dramatic unforeseen risk. In this case it was BP. Mutual Funds can also possess much more risk than you thought you were encountering.
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In his book "The Trouble With Mutual Funds," Richard Rutner shares that "No one denies that the average mutual fund returns 2% less per year than the stock market returns in general. Yet the mutual fund industry spends billions of shareholder dollars to promote its money managers as experts who can manage investor`s dollars with skill. The vast majority of mutual funds (94% according to a recent five-year survey by Lipper Analytical Services) have underperformed the stock market as a whole."