Press Release Summary = Most investors pick mutual funds based on recent fund performance, the suggestion of a friend, and/or the praise bestowed on them by a financial magazine or fund-rating agency. While using these methods can lead one to selecting a quality fund, they can also lead you in the wrong direction and wondering what happened to that \"great pick.\"
Press Release Body = Most investors pick mutual funds based on recent fund performance, the suggestion of a friend, and/or the praise bestowed on them by a financial magazine or fund-rating agency. While using these methods can lead one to selecting a quality fund, they can also lead you in the wrong direction and wondering what happened to that \"great pick.\"
Despite the distinctive characteristics of mutual funds - performance, management philosophy, & investment objectives - your specific selections should be chosen within the context of your overall financial plan. Examining features such as past performance are not where your studies should begin. The point of departure is you; your financial priorities; your resources; your approach to investment diversification; your willingness (or lack thereof) to accept market volatility; and your time horizon for a particular investment.
Total Returns are fun to look at and brag about, but simply looking at a fund\'s total return for the past year is not necessarily a good measure of a fund\'s quality. For example, investors often talk about how well a specific fund did last year and how happy they are with that performance -- say a 16% return in an equity income fund. Well, in a given year that may or may not have been a good return for an equity income fund. That fund may have under-performed many or most other equity-income funds for the year. Returns should always be measured in context with how other similar \"categorized\" (e.g.. equity income funds, growth funds, small cap funds, etc.) funds have performed. So don\'t get overly excited by a funds total return until you see how it compares to other similar funds over the same period.
As it is often said, past performance can\'t predict future results. But when comparing performance of funds, it is also wise to look beyond the results of one or two years. Most experts suggest that a larger \"window\" of 5 to 10 years gives a clearer picture of historical performance. Has your fund or the one you are considering performed well over this longer time horizon? Any fund can have one good or one bad year, but if you are investing for the long term, you want a fund that has a consistent track record. While that record doesn\'t guarantee future results, it gives you an indicator that may be to your advantage.
2025
