Today’s post concludes our mini-series on “how to invest with mutual funds“, although in the future, we’ll discuss how “exchange traded funds” (ETF’s) provide an even cheaper way to invest in a wide verity of stock and bond funds. Our concluding topics discuss selling funds and where to get additional information.
Selling your funds
Plenty of people discuss buying funds, but how about selling funds. Even good managers can have a poor year or two, so bailing out of a fund at the first sign of weakness is not necessarily worthwhile. Nonetheless, you may wish to consider selling a fund that consistently trails its peers, has poor performance after a good manager leaves, gets too big for the managers to find enough good investments, or changes the investing style you are comfortable with. Remember that frequent trading of one fund for the latest star doesn’t mean that your future return will be anywhere nearly as good as the hot performance that got your attention. Past performance does not predict future performance in the short term.
Getting Fund Information
Bond funds can be fairly self-explanatory, but with others, it’s very important that you fully understand what type of mutual fund you are getting into. Many of the largest mutual fund companies have offices in major metropolitan areas, but as usual, the best way to get information, setup an account, and manage an account is probably thru their website. Telephones also work for those who like to press 1 – 3 – 4 – 1 – 3 etc. to wait on hold to talk to a real person.
You can get the most detailed information about mutual funds from their “prospectus” which is a pamphlet that is more than just pages of dense fine-print for the lawyers. In fact, the Securities and Exchange Commission (SEC) requires them to include specific information that actually helps potential investors compare different funds. You can find information about the fund’s investment goals, performance over the past ten years before and after taxes, fees, summary profile, and other information. You can obtain a prospectus from the fund and many websites, including the SEC’s.
Many investing publications and websites provide suggested, mutual funds including these:
When choosing mutual funds, pick funds that combine low expenses with strong long-term performance. Fund screeners, especially fee-based ones, often let you select from additional categories such as analyst ratings, risk/volatility, stewardship of shareholder interest, insider investing, tax efficiency, comparison to indexes, and more. Brokerage websites frequently provide mutual fund screeners. Here are other websites with mutual fund screens:
- http://screen.morningstar.com/FundSelector.html – Includes a wide variety of data to screen for.
- http://www.kiplinger.com/tool/investing/T041-S001-mutual-fund-finder/index.php – Screen funds by type, performance, and fees.
These websites offer a wide variety of free resources about mutual funds:
- http://finance.yahoo.com/funds/ – It provides mutual fund articles, news, fund screener, prospectus’, top funds, and fund family information.
- http://www.sec.gov/investor.shtml – The US government website offers publications, information, calculators, a database to review brokers and advisers, and a site to submit complaints about problems with mutual funds and other investment companies.