Heike Moeller February 24, 2020 Mutual Fund
If you are unwilling to take much of a risk, you are likely to stick with investing in fixed funds which will not leave you in a position where you are likely to lose everything, but they are also unlikely to put you in a position where your savings will multiply low risk often equals low growth . Over Confidence - more than one employee told me that they are investing their money in only one or two funds. Consider Lifestyle Funds - lifestyle funds are an excellent option for investors who feel that they do not know enough to invest for themselves or that do not want to deal with the hassle.
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.
Because these funds are not actively managed, you cannot weed out under-performing securities from the overall index. This can and does have a detrimental effect on your returns. If market conditions warrant action, index funds usually will not be altered unless it happens to coincide with their regular re-balancing schedule.
Dismiss recent results Past performance is no indicator of future results. No truer words could ever be spoken and they are included in every mutual fund advertisement. But it is extremely difficult to ignore these numbers which the fund companies conveniently place in big bold letters - immediately above the fine print warning us. Nothing is more attractive than a fund with a great record, especially given the dismal performance in the market.
Past performance can provide a good starting point, but nothing more. In fact, past performance predicts losers better than the winners. A 1998 study from fund-tracking firm Morningstar, demonstrated the top fund performers rarely hold their spot on the charts. The study also concludes bottom performers rarely did anything but continue to sink. Never assume the past will repeat itself, yet, ignore a fund`s historical record at your own peril. Avoid the perennial losers.
The trading strategy for each group will be different. One group may only require a "minimum hold" of 30 days while another may require 90 days. A `dividend` group may result in very infrequent trades while a `sector` group may trade more frequently because of changes in the economy and offer opportunities for large gains, large profits. You may, as I have, have two or even three different strategies for the same group of funds, one based on more frequent trading then the other.