investing

How to evaluate a mutual fund portfolio

 

 

It's great to hear about an investment that is outperforming others; it really makes your ears perk up. Be careful about chasing performance in the world of mutual funds, though. Here are several factors you should consider when evaluating which funds should go into your portfolio.

Let's start at the top. There are two flavors of funds to choose from: index funds and actively managed funds. Index funds are designed to track the market index. What's a market index, you ask? A market index is a section of the stock market.  

Think of index funds as a way to be on investment autopilot. They are not run by an active portfolio manager, so the expenses are lower. The less you pay out, the more you keep.

Actively managed funds have a portfolio manager who is calling the shots. The expenses are higher, and guess what? These funds tend to underperform their target indexes over time. Stay with me here; chances are, you are not going to get what you pay for because higher expenses translate into an overall lower return.

Insider Tip:

Because stock markets are inherently unpredictable, even seasoned fund managers have a hard time picking the right thing. Eighty-five percent of active mutual funds underperform their target goal.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
advertisement

CDs and Investment

Can heirs cash an old trust?

Dear Dr. Don, The youngest of 6 children, I am 48 years old. My father joined the Navy at 22. In Italy, he met his bride and my mother, and returned to the U.S. to raise our family. In 1959, he bought a trust certificate... Read more

advertisement

Blog

Claes Bell

We love real estate, but does it really pay?

Economists think there's a better long-term investment. Who's right?  ... Read more


Connect with us