A mutual fund is exactly what it says it is. It is a fund that is actually a company whose service is to provide pooled investment accounts to their customers.
When you are clear about the thoughts of investment, it becomes easier to choose the right fund scheme. Often people look for the record of accomplishment of a company while investing. There are many factors considering which can help you to select top mutual funds. The record of accomplishment of a company is a crucial factor but it is not the only one. The future profits are not guaranteed by the past performance of the investment companies. It is just one of the factors while determining the right investment for you. If you want to play safe, consider the company’s longevity. If the company has been in the market for quite some time, it assures less risk. If you are willing to take a hit and play with aggressive situations, investing in relatively younger mutual funds would be a better option for you.
This is essential in understanding what a manager is actually doing and if their processes are robust. It is in the quantitative (the numbers!) analysis where most investors lose fortunes. Quite often you will see a fund shown as being top over one year, two years, three years and five years. An investor at that point might think they now have a fund that is good over the short, medium and long term. However they could be about to make a huge mistake. This fund could well have had a large spike in its performance over the last few months. They could have had an exposure to oil for example, and the fund might have a rocketed short term performance.
Since you wont be watching these on a daily or weekly basis most likely, make sure you sit down and understand what fees you are subject to. You don’t want to pay someone else to manage money for you that is not making good money in return. Estimate the time when you would be requiring the money you had invested along with the benefits out of that investment. This estimation could be a good option of finding top mutual funds for you, making your investments more secured and goal-oriented.
It is also worth assessing how much risk a fund is taking to achieve an objective. If a fund returned 50% in a year by taking a risk of 8 (crude measure I know) and there was a fund that took a risk of 6 but returned 48%, which would you choose? Which is offering the best value? The downside risk is much greater yet there is little out performance. Risk is all about the potential for loss and potential for gain. They are in equal measure. A good investment IFA will be able to assess risk via a range of processes such as (bit of science now) standard deviation and Sharpe ratio for example.
A good mutual fund advisor should check in with you every six months. You will probably get monthly or quarterly statements about you account, but your fund advisor should contact you every six months and go over those statements and see if you have any questions. And do not be shy to ask any questions you have. It is your money and you need to oversee your advisor. Your advisor needs to encourage you to sit down with him on an annual basis. At this meeting you should discuss with him not only the investment results, but also what your investments goals are now. Most likely they will not be changing every year, but there will be times that your plans have changed. And your investment advisor needs to be aware of what changes on going on in your life that might affect your
Lee Smith, Financial Advisor is a Stock Market Consultant that gives ideas on timing mutual funds.