Sarah Neudorf February 23, 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?
Watch the indexes, and watch your funds if they have symbols. Fixed Funds Fixed Funds, sometimes called Guaranteed Funds, are known for steady, predictable growth in the long term. They carry Guaranteed Interest Contracts underwritten by insurance companies, and because of that fact are commonly considered very low risk funds. This includes the additional protection of the funds from garnishment or attachment by creditors or assigned to anyone else, except in the case of domestic relations court cases dealing with divorce decree or child support orders QDROs; i e , qualified domestic relations orders .
Many investors try to play the game of picking individual stocks rather than picking solid mutual funds and then often wonder why they experience both difficulty and stress making money in the stock market. I tell investors that they should not be afraid to own individual stocks if they are willing to take the time to learn enough about the individual company or stock to make a rational businessman`s decision. And do not forget about valuation.
SEC Chairman Arthur levitt, Jr. warned of growing unfairness in the relationship between individual investors and mutual funds in January 2001. Mr. Levitt made the following comment: "THERE ARE A NUMBER OF INSTANCES THAT, QUITE FRANKLY, DO NOT HONOR AN INVESTOR`S RIGHTS. INSTANCES WHERE...HIDDEN COSTS HURT AN INVESTORS BOTTOM LINE, WHERE SPIN AND HYPE MAKSE THE TRUE PERFORMANCE OF A MUTUAL FUND, AND WHRE ACCOUNTING TRICKS AND SLEIGHT OF HAND DRESS UP A FUND`S FINANCIAL RESULTS"
Always review the experience and performance of the fund`s managers. When you buy a mutual fund, you are actually investing in the experience, skill, and savvy that the manager brings to the table. When the manager leaves, the fund performance generally goes with him. How many years has the manager been leading the fund? The longer (if generating strong results), the better. And keep an eye out for the gurus. The industry`s better managers are well-respected, high-regarded, and often quoted in the press. You will find multiple articles and even manager profiles published in the popular financial magazines and newspapers.
Mutual funds also cost less. You do not have to spend a lot of money to purchase them like you may have to with a single stock purchase. Plus, you can invest small amounts at any time with no trading costs. If you have decided to invest in a mutual fund, there is one problem. There are well over 10,000 funds available so which one to go with. Before you actually invest in a mutual fund get a prospectus from the company. The prospectus will tell you about the fund including the funds goals and how the goals will be achieved, along with a chart of past performance and fees.