Tag Archives: Mutual Funds

Find Mutual Funds That Fit Your Portfolio

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The benefit of investing in mutual funds

Not only are mutual funds a viable option for your investment portfolio, they are also one of the safest investment vehicles to invest your money in. Despite the simplicity of that statement, the task of finding the best ones for your portfolio can be a daunting challenge especially if you have an account that doesn’t give you the assistance of a financial adviser who might be able to point you in the right direction. However, diversifying your portfolio by investing in several mutual funds is oftentimes recommended by financial planners as this reduces your overall investment risk where your portfolio is concerned.

There are no real headaches involved with mutual fund management because each fund has a manager who searches for the most prosperous sectors to invest in. Additionally, this affords the investor with some leverage due to the minimized risk that is involved. Obviously, you want to search out the top performing mutual funds if at all possible. Of course, this is easier said than done since there are hundreds of them out there in the investment arena to choose from.
Steps to choosing the best mutual funds

So what do you need to look for when trying to decide on the best mutual funds to invest in? Keep in mind that there are 4 significant types of mutual funds including:

• balanced mutual funds – these feature moderate risk
• debt mutual funds – appeals to the investor who wants to play it safe
• equity diversified mutual funds – typically appeal to the risk taker
• equity linked mutual funds – decrease tax liability

Here are 3 suggestions for selecting the best mutual funds for your investment portfolio:
Advisory Board/Board of Advisors – this entity is comprised of numerous asset managers who are responsible for the performance of a mutual fund. Investigate this in order to see what the track record is like. If there is a positive track record, then your investment will most likely be safe.

Past performance – obviously, you always want to look at a mutual fund’s overall past performance to determine if it has been a consistent gainer. It is recommended that you see where it has been for the past 3 to 5 years before making a decision. Just be aware of the fact that regardless of past positive performances that this is no guarantee of how it will perform in the future. However, this does give you a clear picture of how stable the fund house is.

Rankings – Lipper Leader Fund Ratings and Morningstar are two companies that are excellent mutual fund rating firms. They hand out points and “stars” to those mutual funds that have displayed a positive performance in past years. Additionally, the consistency of return on investment and the tax efficiency is taken into consideration as they rate the different mutual funds.

Obviously, there are other steps that you can take for selecting the best mutual funds for your investment portfolio, but we recommend that you consider the 3 above before investigating further. Remember that investing is always a risky business, so you want to do everything in your power to protect your investments.

What To Do If Your Mutual Fund Changes Managers

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What is a mutual fund manager?

The individual or individuals who are responsible for implementing a mutual fund’s investing strategies and the management of portfolio and trading activities is known as a mutual fund manager or more simply, the fund manager. Additionally, mutual funds can be managed in a number of ways such as:

• by one person
• two persons or co-managers
• a team of three or more persons

Typically, fund managers are compensated by a fee which is oftentimes a percentage of that mutual fund’s managed average assets. In order to qualify for the position of fund manager, there are certain requirements including:

• high levels of both educational and professional credentials
• appropriate experience in investment management

Anytime you are considering investing in any mutual funds, you should always look for a long term, positive performance history and a fund manager whose track record mirrors the fund’s performance.
How to handle a change in fund managers

What most fledgling investors don’t realize is that the decision on investing in a particular mutual fund is to purchase the fund or the manager. That is the biggest challenge encountered when a mutual fund changes managers. Although this is not always the case, a change in fund management typically signifies a “red flag” and investors will need to put on their detective hats.

In most cases questions will need to be answered, answers will need to be deciphered, and a decision will need to be made regarding selling the fund or sticking with it. Naturally, it is simpler to stick with the fund manager since they have been responsible for some or possibly all of the fund’s performance. However, many fund companies will dictate a fund’s investment strategy and style, oftentimes demanding that the fund manager follows those mandates. This results in many transitions becoming relatively seamless.

In recent years, increasing numbers of fund companies have shut down the guru-making machinery which was their driving force in the 1990’s. Instead they are hiring management teams that may not be negatively or positively impacted by losing a single member. However, the departure of a fund manager is usually an indication or a warning and not so much an indication for you to sell off your fund.

What you want to remember is that a fund manager usually weighs the pros and cons when a top level executive departs a fund that is in their portfolio. So you need to be very critical and methodical as well as avoiding those knee-jerk reactions that you may regret later. Some things that you want to consider are:

• why the change in management was made
• if the transition was one that raised a lot of eyebrows or did it go smoothly?
• did the change equate to promoting a talented analyst or manager within that company?
• will that new manager make a positive difference in the performance of the fund?

In most instances, considering the above will help you in the decision making process.