Your Mutual Fund’s Performance Is Invalid
Yesterday I read through the Los Angeles Times 2007 mutual fund review. The main thrust of the article was the modest gains equity mutual funds logged for the year. Well, during the past six trading days those modest mutual fund gains have largely evaporated.
As of today, the average U.S. stock mutual fund is actually in the red for the past 52 weeks. What a difference a few bleak days make! Simply put, I don’t want you to take this current decline lightly.
You may think your mutual fund’s performance last year has you in the black, but the reality is that during the past two weeks any gains you may have hooked have now been thrown back into the water.
When assessing your mutual fund, keep the following five things in mind:
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Your overall allocation. Many of the portfolios I’ve looked at lately contain between seven and 12 mutual funds. Unfortunately, having that many funds makes it difficult to know precisely your overall market exposure.
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The type of funds and the ticker symbols. It may sound simple, but you’d be surprised at the number of folks who don’t know the names or ticker symbols of the funds they own. Knowing this information allows you to easily assess a fund’s performance, and this is the key to finding out if you are in the right funds.
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Your performance in all market conditions. Your fund may be performing well now, but how did it perform in a bear market? Finding out a fund’s performance history over various market conditions is very helpful in determining if you should continue to hold it.
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Fees. How much are you paying for the privilege of letting that fund manager use your money? Most mutual funds cost a lot, and most just simply aren’t worth it.
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Find an ETF alternative. You probably already know what a big fan I am of exchange-traded funds (ETFs), but did you know that there are more than 620 ETFs now available? Most mutual funds have an ETF alternative, and given their transparency and low cost, it just doesn’t make sense to load up your portfolio with underperforming mutual funds.
If you want assistance to determine if your mutual funds are working for you, we are here to help. To find out how Fabian Wealth Strategies can aid you in getting a handle on your money, just pop us an e-mail , or call us at 800.391.1118.
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
