How to Find the Best Managed Funds - Part 2

In the first part of this report we looked at how you pick the best quality managed funds. In this part we are going to look at how you choose the best performing managed funds from your selection of quality funds.

Many of the research houses have useful analysis tools and a particularly good one to use is the Peer Group Ranking Report available with Morningstar. What this tool will do is rank all of your selected funds into a respective category. Let's say you are looking for a geared Australian share fund as part of your portfolio. Morningstar will find every available fund that specialises in Australian shares and uses gearing in their investment strategy. Likewise, you may want to find a fund that invests into the largest international companies. Whatever type of fund you are looking for, Morningstar will have a category for it.

Within each category, the Peer Group Ranking Report will show the performance figures of each fund over 3 months, 6 months, 1 year, 2 years, 3 years, 5 years and 10 years. When looking at performance the best time frame to look for is 3 years. Many purists will tell you that past performance is no guarantee of future performance and this is true if you were looking at one fund in isolation or choosing a fund based purely on performance without looking at the quality of the fund manager.

Viewing performance over a 3 year time frame allows you to see how consistent the fund has been performing. Shorter time periods like 3 months or even 1 year are not long enough and performances could be adversely affected by volatility in the markets. Likewise, you do not want to base your selection on the longer time frames like 10 years. The quality of the fund may have changed over that time and it is likely the fund has different individual investment analysts and managers.

Looking at a specific category like large valuation international funds, you will find that Morningstar has approximately 60 funds in this category with a 3 year performance history. The Peer Group Ranking Report then shows the performance of each of these funds ranked overall and in quartiles. For example, if the peer group consists of 60 funds, then the 15 best performing funds over 3 years would be ranked in the 1st quartile. The 15 worst performing funds would be ranked in the 4th quartile.

If you looked at a Morningstar report for September 2009 you would see that the Platinum International Fund had a 5 star ranking and was ranked 1 out of 58 funds placing it in the first quartile over the 3 year period.

So, the 2nd step in the process involves selecting only those funds performing in the 1st or 2nd quartile over 3 years. I always include the 2nd quartile, particularly if you have a small peer group like geared Australian share funds, as there may not be any 4 or 5 star funds in the 1st quartile. Never pick a fund in the 3rd or 4th quartile and if a fund does not have a 3 year history then move on and find another fund. What you are looking for is proven performance history and you will only get that with at least 3 years trading. Many research houses will give a high ranking to a fund based on the quality of the fund manager even if it has only been trading for a year and has no comparative peer group performance.

So, let's recap on the formula to pick the best managed funds.

* 1st Step: Pick only those funds ranked 4 or 5 stars
* 2nd Step: Pick only those funds ranked in the 1st or 2nd quartile.

This formula will give you the knowledge that you not only have the best quality managed funds in your portfolio, but also the best performing managed funds. It also gives you an excellent basis for conducting an annual review of your portfolio. If the fund falls below 4 stars or the 2nd quartile, then look to replace it.

If you have any questions about the system or the Peer Group Ranking Report feel free to contact me or leave a comment on my website.

Rob Bourne has been involved in the financial services industry for over 35 years. As a practising financial adviser he focuses on the need for practical and down to earth financial education. The aim is to educate people through financial education so they can take control of their own financial future. Visit Rob's website here for more information on business opportunities and investing.

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The Best Mutual Fund Investment Strategy

The best mutual fund investment strategy for most people reduces risk and gives the investor plenty of flexibility. Here's how to set yourself up to invest money so you don't need to worry when the investment environment turns ugly.

We'll use Jack as our example. He's afraid of losing money, but at the same time wants to earn higher returns than he can get from his bank. A moderate risk, at most, he will accept. Jack is also frugal, and hates to pay fees to invest money. He has a savings account at the bank he adds to regularly.

His best investment strategy, according to his brother Jim whom he trusts, involves opening a mutual fund account with a major no-load fund company. This is where you get the best mutual fund investment bang for your buck, according to Jim, because the cost of investing is low. Plus, with a mutual fund investment you get professional management as part of the package.

The best mutual fund investment strategy for most people reduces risk and gives the investor plenty of flexibility. Here's how to set yourself up to invest money so you don't need to worry when the investment environment turns ugly.

We'll use Jack as our example. He's afraid of losing money, but at the same time wants to earn higher returns than he can get from his bank. A moderate risk, at most, he will accept. Jack is also frugal, and hates to pay fees to invest money. He has a savings account at the bank he adds to regularly.

His best investment strategy, according to his brother Jim whom he trusts, involves opening a mutual fund account with a major no-load fund company. This is where you get the best mutual fund investment bang for your buck, according to Jim, because the cost of investing is low. Plus, with a mutual fund investment you get professional management as part of the package.

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Mutual Fund Ratings - Can They Be Trusted?

The ratings of mutual funds are placed on them by the history of the previous performances. By researching the companies that you wish to invest in and charting the mutual funds ratings you can certainly see trends develop in the potentials for both profits and losses in these funds.

Funds are usually chosen by those that want to cut down on the risk. The diversity of mutual funds allows for investing in more than one source. A mix of bonds, money market securities or stocks make up a fund in order to cut the risk of putting everything in one place. They are rated in order to help the investor chose which funds are right for them. Each company has its own standards for determining a fund's rating.

Most fund ratings are determined by the past performance of the company making the mutual funds available. The mutual funds performance is commonly tracked for a period of five to ten years in order to have a developed pattern emerge as to the performance. Being as the past is sometimes an indication of what the future holds it stands to reason that it should indicate future performance. This is not entirely the case as it is known that unless you can see into the future you will not know what the future holds with certainty.

For instance Morningstar gives one to five stars as ratings. The score the company first gets on the risk of the fund is what the system is based on. The performance of the fund for the previous five years is then taken away from the original rating. The reliability of this system is not very good as the performance is based on past numbers and can not accurately predict the future earnings or losses on these funds.

Lipper Inc ranks its funds based on prior performance. The worse the performance the higher the rating to indicate a larger risk, the lower the rating the better the performance has been. The total return, preservation, consistency of the return, its tax efficiency and the expense are all factored in to determine the fund's actual risks. This method should be more accurate in determining the actual risk and profit factor involved in the mutual fund.

These are just two of several companies that provide ratings on these funds. Research them and take the time to evaluate the past performance before going with one of these companies for investment advice.

When you rely on fund ratings to provide the needed investment information you should be sure to look at more than one ratings system. You want to follow the ratings company that has the most successful record of predicting the future potential of mutual funds.

Mutual fund ratings while they can be accurate at times are not something to base your future investments on alone. If you rely on these alone you may as be blind folded to pick your investments.

Invest your time wisely and visit MutualFundPlanning.com for more tips on how do mutual funds work and mutual fund suitability compliance and improve your portfolio today.

Article Source: http://EzineArticles.com/?expert=Christopher_W_Smith

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This is What Investment Securities Entail

Investment securities refer to the documents that show that, one has lent money to a company or even to the government. The money is refundable upon an agreed period of time. The documents are purchased most commonly through the stock market. There are many types of investment securities available in the stock market today. However, they call for proper scrutiny before one can buy them because, what may be favorable in one situation or for one person, may not necessarily apply to another.

The securities range from bonds, stocks, mutual funds, treasury bills and bonds, shares among others. The rates of returns vary greatly depending on the type of security and the risk involved in each. Before an investor can buy the securities, there are some factors that need consideration. One needs to identify what it is that they hope to achieve by buying the securities. Is the investment for the purpose of gaining more money for immediate use, or is it merely as a way for saving for the future.

Saving for the future could mean having a retirement plan, or saving to buy a home or saving for your children education. If the purpose for example is to accumulate money for immediate use, securities like government treasury bills may not be the best to go for. This is because they take a long time to mature and earn dividends. They may therefore be best suited for future plans like retirement or use during a long planned for holiday or vacation.

It is wise to be informed on the different types of investment securities available in the market today. They are mostly classified into two categories, namely; equity securities, which include common stocks and debt securities, which include bank notes, treasury bills and bonds. The institution from which one buys the securities is known as the issuer. One needs to be careful about the insurer he chooses to work with especially because of the commission charged.

Peter Gitundu Creates Interesting And Thought Provoking Content on Mutual Funds. For More Information, Read More Of His Articles Here INVESTMENT SECURITIES.

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Fund of Funds

Mutual fund investments come in various sub categories that require keen attention to details, lest an investor finds himself investing in the wrong type. A fund of funds investment is a bit different from other categories in that, it does not invest in other securities like stocks and bonds. Instead, it holds portfolio of other investment funds. In other words, it is a multi-manager type of investment.

Under this category there are also other sub categories, all of which hold portfolios for different investment securities. For example, there are mutual FOF, hedge FOF, private equity FoF and investment trust FOf. The features of all these categories are significantly different from each other, depending on the type of securities they invest in, the risk factor involved as well as the type of management required in each.

Due to their collective nature, fund of funds types of investment experience a wide range of diversity. Increase in diversity translates to relatively low risk as well as high rates of returns from the various securities. A manager of the FoF is entrusted with the big task of ensuring that your money is only invested in the best securities. He is entrusted with the task of checking that the performance of your investment is maintained at the best level possible.

FOFs are faced with some challenges as well, just like all other types of investments. For example, the rate of return is not always guaranteed; it may rise or fall depending on the market forces. In addition, FOFs are faced with higher management fees unlike other types of investments. This is because the portfolios that they hold are also subject to some management fees which are charged indirectly through the FOFs.

Peter Gitundu Creates Interesting And Thought Provoking Content on Mutual Funds. For More Information, Read More Of His Articles Here Fund Of Funds.

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Utilizing a Mutual Fund Research Guide

Whenever you are looking to buy into a new mutual fund, you probably already know that it will take a lot of research in order to make a wise investment decision regarding that fund. You want your portfolio of mutual funds, stocks, and bonds to grow and provide you with the funds to live the kind of lifestyle you want to live. If you have a large portfolio, the amount of time you spend in research can be very time-consuming, but you know it's the only way you're going to achieve that financial security you're looking for.

One of the easiest ways to diversify your portfolio and take the least amount of risk is by investing in mutual funds. By their very design they're made to mix a number of different types of securities. Although there are thousands of different funds to choose from, your task is made easier through the existence of fund research guides. No matter how much or little investment experience you have, these guides will help you make the right decisions.

At first glance, the field of stock market investment can seem totally overwhelming. How can you ever hope to understand everything there is to know about it? When you look at mutual funds, you'll find that every single one of the 10,000+ mutual funds will claim to be the best investment you can make to earn a consistently high profit.

Not to worry! There are many guides available to help you. As a beginner, you'll want to find a guide that starts with the basics, such as by explaining what a mutual fund is, what different types of funds are available, and how the funds operate. In addition, you'll want to know the factors you need to consider in an investment, be able to avoid the pitfalls many new investors fall into, know what advantages and disadvantages you should look for, and learn the basics of buying and selling.

As with most subjects these days, you'll find a wealth of helpful information on the internet which makes it a good place to start your research. One site you might want to look at is http://www.investopedia.com. This site, and others like it, will help prepare you to make the right decisions when the time comes for investment.

Another reliable mutual fund research guide is http://www.Troweprice.com. This is a good beginner site, because they take you through a step-by-step interactive guide to investing in various funds. Troweprice.com will give you pointers in identifying the right mutual fund investments for your needs.

The Securities and Exchange Commission (SEC) will supply you with a Mutual Fund Cost Calculator. You'll find this to be a great tool to help you know the actual costs of owning a particular mutual fund. It will also give you more information so that you'll be able to make an informed decision.

By law, a fund company must provide you with a prospectus to give you a detailed overview of the fund. If a company doesn't offer you one, you want to find another company who will. The prospectus will tell you what the objectives of that particular fund are.

By contacting various fund companies, you can get a lot of information from them that will help you decide which funds are right for you. Of all the information they will send, though, you'll find the prospectus to be most helpful. Many of the companies have online sites where you can fill out a form requesting information. The more information you have, the smarter the decisions you will make.

Invest your time wisely and visit MutualFundPlanning.com for more tips on mutual fund newsletters and fund selection tips and improve your portfolio today.

Article Source: http://EzineArticles.com/?expert=Christopher_W_Smith

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Energy Funds

With the many types of investments available today, one needs to determine carefully, those which are likely to survive tough economic times as well as competition that is likely to be faced in the market. When it comes to mutual funds in particular, there is quite a lot to choose from. Energy funds are just one of the many categories in this type of investment.

Everywhere the world over, people are making use of energy in one way or the other and the demand is rising with each passing day. This tells you that returns on these investments are almost guaranteed. The investments are also likely to last long and the companies selling them will be in the market for as long as there is demand for the products in their different forms.

With the emerging and expanding economies like China and India, there is likelihood that demand for energy will continue to rise for the purposes of fueling cars and maintaining air-conditioned homes. On this juncture therefore, it is worth noting that, it is far much better to invest in mutual funds than in individual stocks.

When an investor chooses to invest his money in the energy sector, he is highly encouraged to do his homework and eliminate those firms that are likely to lead him astray. There are some investment companies that get to a point of feeling like, they have invested enough and thus do not welcome new investors. This is the quickest way to bring down a pool of money because, it means that, there is no growth. Other categories of energy investments to avoid are the loaded ones. They come with many expenses that leave you with a very slim profit margin.

Peter Gitundu Creates Interesting And Thought Provoking Content on Mutual Funds. For More Information, Read More Of His Articles Here ENERGY FUNDS

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