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How should I evaluate mutual funds?

evaluate funds

evaluate funds

New York - You should ignore a mutual fund that only can boast about short term performance which we define as less than five years. We consider the following characteristics, more important than short term performance:

  • Experienced Fund Manager - Although a new fund manager or mutual fund may be aggressive and initially outperform a comparative index, mutual fund managers should be experienced in both bull and bear markets. A bear market may cause a sudden need for cash as investors sell mutual funds shares. Inexperienced fund managers or mutual funds may panic and inappropriately sell the wrong securities or will not be able to efficiently liquidate securities. Such a failure could significantly impact any previously earned gains.
  • Risk vs. Reward - You need to ensure that your mutual fund's objectives are consistent with your personal investment strategy. You do not want to exposure your portfolio to risks you personally would not take.
  • Disciplined Investment Style - It is important to ensure that a mutual fund sticks to its stated objectives. Hence, a bond income fund should not be purchasing dividend paying stocks to produce income.
  • Long-Term Performance - It is important to examine the returns that a mutual fund has delivered over the long term such as five and ten year trends. Measure this performance with its peer. A fund with a proven track record should give you additional confidence that your fund is managed for long term results. 

Source: For more information or to get connected to a FEE-ONLY financial adviser, money manager, CPA or Attorney, visit America's Favorite Independent Advisory Network at or 1800ADVISER.COM.


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