Evaluate the Managers and their Past Results
Even when dealing with other types of investments, you should always carry out a thoroughly research on the fund's past results. Here’s a list of questions for you to ask when having a look at their historical record:
· Are the results delivered by the fund manager consistent with general market returns over the past few years?
· Do the returns have dramatic changes throughout their years of services?
· Was there an unusually high turnover (which can result in larger tax liabilities for the investor)?
If you haven’t notice, past performance doesn’t guarantee any future results. Because of this, you should review the investment company’s literature and keep an eye out for information about anticipated market trends in the coming years. In almost all cases, a fund manager will give a sense of its prospects to the investor in this case you. The prospects may include the funds or its holdings in the next few years or he might discuss about the general industry trends that might be of great help.
Size of the Fund -
Usually, the ability for a fund to meet its investment objectives does not depend fully on the size of the funds. In some rare cases, a fund might get too big. For example, a firm in US, say ABC. In the year of 1999 the fund had a total of around $100 billion worth of assets. Due to the large number of investments, it was forced to change the normal way of its investment process to make space for the large money income. This brought up to the company’s focus primarily towards larger capitalization growth stocks rather than the normal small- and mid-cap stocks. As a result from their decision to make this change, its performance dropped significantly.
In Sum -
Investing in mutual funds may seem like a hard task, but knowing your way around mutual funds is half of the battle. Take your time when looking for the best mutual funds to invest in.