Question about mutual fund selection | TigerDroppings.com

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jimbeam
USA Fan
University of LSU
Member since Oct 2011
30605 posts
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Question about mutual fund selection


This may be a stupid question, but:

When it comes to buying individual stocks, obviously a lot of average people buy high, then it falls and sell low. Which isn't making them any money.

When looking at mutual funds, what should you be looking at besides the average ytd/1yr/5yr/ect returns and expense ratio? To the me it would seem picking the fund with the highest long term return with lowest fee would make sense. But it also feels like I'm missing something.

Thanks in advance for helping a noob.







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matthew25
Ole Miss Fan
Member since Jun 2012
3374 posts

re: Question about mutual fund selection


I look for 4 or 5 stars.

Manager with 5+ years.

Risk must be average or below.

Return must be above average or high.

Low expense, low turnover. I also look at yield.

B/c of the Great Recession, I look at returns from 2010, 2011 and 2012, plus YTD.




Then, pray.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
29859 posts

re: Question about mutual fund selection


I look at the expense ratio and also carefully read the prospectus so that I know what they actually invest in. My favorite example is various Asian funds that really are basically Japan funds. That can be perfectly fine, but it isn't a larger Asia exposure. Know what you are buying.

I basically ignore how the fund has been doing lately, that is a very unreliable indicator.






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Chris Farley
Maryland Fan
Regulating
Member since Sep 2009
3663 posts

re: Question about mutual fund selection


quote:

Risk must be average or below. Return must be above average or high.


Doesn't exactly work like this

quote:

I basically ignore how the fund has been doing lately, that is a very unreliable indicator.










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gatorsimz
Florida Fan
cafe risque
Member since Feb 2009
5380 posts

re: Question about mutual fund selection


I look at inception date, management tenure, portfolio holdings, fees, 10 year and since inception returns.

Inception date is important because you could have two identical equity funds, one started in 2007 and the other in 2009, and the latter could have a higher return since inception by 10%.







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jimbeam
USA Fan
University of LSU
Member since Oct 2011
30605 posts
 Online 

re: Question about mutual fund selection


quote:

I basically ignore how the fund has been doing lately, that is a very unreliable indicator






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matthew25
Ole Miss Fan
Member since Jun 2012
3374 posts

re: Question about mutual fund selection


I have helped write a prospectus and then annual reports. Full of sunshine, rainbows and pink ribbons.

I stay domestic. It's hard enough keeping up with 'Merica, much less China, Japan and Germany.






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