Mutual Fund Talk

Beating The Market Is Easy (and Here Is How)

Mon, 05 Mar 2007 23:36:49 -0800

Settling for the average by index investing is ok, but one can surely do better. Tim Middleton at MSN Money offers some time-tested mutual fund recommendations.

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Are Mutual Fund Managers Gaming The (Morningstar) System?

Sun, 04 Mar 2007 18:50:05 -0800

While it is certainly true that one can game the system by being risk-averse -- Morningstar values risk-adjusted returns instead of absolute returns -- I still believe in the franchise of Morningstar and the effectiveness of its rating system. At the end of the day, Morningstar's rating is a relative rating comparing each fund to its competition in the same style category, so if everyone is trying to reduce the risk, you can safely bet the trend will turn opposite ways before soon.

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Mutual Fund Tax Bills Are Climbing

Mon, 29 Jan 2007 22:28:18 -0800

It shouldn't be a surprise to mutual fund investors that after a few years of steady returns, mutual funds are returning more money to investors as capital gain distributions. How should smart investors respond? Stay with those funds with low turnover and long-term perspective.

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The 10 Hottest Selling Mutual Funds

Tue, 09 Jan 2007 17:15:04 -0800

"For 2006, though, I was pleased to see that the trendiest stuff didn't make the list. No China funds, no Russia funds, not even a real-estate fund. Rather, the top-selling funds were broadly diversified, well-managed, and low in cost. True, there was an emphasis on funds with strong recent returns and many of the funds suffer from asset bloat, but those are minor concerns compared with buying supertrendy supercostly niche funds like the top-performing China funds."]]>

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2006 Morningstar Fund Managers of the Year

Wed, 03 Jan 2007 18:28:31 -0800

Morningstar announced its 2006 award of Fund Managers of the Year. The report also includes some good fund picks too.

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Will Fidelity Magellan Ever Beat The Market Again?

Sun, 26 Nov 2006 19:06:35 -0800

Although those at Kiplinger's Personal Finance remain positive, I seriously doubt the new manager Harry Lange can master a turnaround story for this $45 billion fund.

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Featured Fund: Vanguard Wellington (VWELX)

Tue, 21 Nov 2006 19:03:20 -0800

Kiplinger's Personal Finance reviews the legendary balance fund Vanguard Wellington.

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Target-Date Funds Launched at American Funds

Sat, 18 Nov 2006 14:35:33 -0800

Morningstar reported that American Funds has launched nine target-date funds. It shouldn't be a surprise since almost every major fund family has launched similar offerings.

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Mutual Fund Investors: $20 Billion Tax Bomb On The Horizon

Mon, 13 Nov 2006 11:46:52 -0800

The time tested truth is if you have a profitable year in mutual fund investing, be prepared for a big tax bite.

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Mutual Funds Pass $10 Trillion Mark In Assets

Mon, 13 Nov 2006 11:38:37 -0800

Baby boomers, exchange-traded funds and stock market performance were mentioned as forces behind the $10 trillion achievement of the mutual fund industry. Will the collective actions by baby boomers someday cause massive cash outflow?

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How to Start Investing in Mutual Funds

Sun, 12 Nov 2006 23:14:07 -0800

If you are into investments but you don't want to invest in one kind of stock or another, perhaps you would rather invest in a mutual fund. With mutual funds you can diversify, meaning you can buy more than one kind of stock. By diversifying you reduce the risks without losing your returns. When you work with mutual funds you can manage them better. You normally don't buy mutual funds directly. Instead you hire a professional manager to care for your purchase. These managers know how to care for the fund and have credentials to prove it. Buy having mutual funds you can keep track of them easier. This is because you only have one portfolio to deal with instead of perhaps hundreds of stocks. And if you need money quickly, you can go with mutual funds because they are very liquid. Mutual funds also cost less. You don't have to spend a lot of money to purchase them like you may have to with a single stock purchase. Plus, you can invest small amounts at any time with no trading costs. If you have decided to invest in a mutual fund, there is one problem. There are well over 10,000 funds available so which one to go with. Before you actually invest in a mutual fund get a prospectus from the company. The prospectus will tell you about the fund including the fund's goals and how the goals will be achieved, along with a chart of past performance and fees. Before you invest in a fund, look at the fees the company charges. You will notice these fees in the prospectus. If you are ambitious, you will be able to find the fee structure online. Always go with a fund that has a low expense ratio and stay away from 12b-fees. Another thing to keep in mind is not to buy loaded funds. These are funds that have sales charges attached to them. If you purchase these types of finds, you will be paying sales charges on top of other fees. Don't forget to overlook the mutual fund's risk factor. If the fund looks to unstable over the years, or shows signs of it being too risky, don't get involved. And also check with the SEC to make sure the company is decent and has a good reputation. When buying mutual funds you will have various types of choose from. There are money market funds, municipal bond funds, corporate bond funds, mortgage-backed securities funds, U.S. Government bond funds, stock funds, and index funds. Mutual funds are no doubt the best way to invest. Just study the market and understand your options. If you do your research, you will be able to pick a fund that will benefit you in the long run. Investigate the company and know what you are getting into. Don't leap before you look first. You may end up getting less than what you bargained for it you do.

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Is Bill Miller's Lucky Streak About To Be Over?

Wed, 01 Nov 2006 20:46:24 -0800

Morningstar's Greg Carlson concludes that although it will be hard for Bill Miller to pull off another last-minute trick to beat S&P 500 for the year, investor should be better off appreciating the long-term appeal of his Legg Mason Value (LMVTX) fund.

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International Fixed Income Fund Recommendations

Tue, 31 Oct 2006 00:54:13 -0800

I have no appetite to get exposure on international bond funds. I leave the task to Bill Gross by investing in his PIMCO Total Return fund.

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10 Best Domestic Equity Mutual Fund Managers

Mon, 23 Oct 2006 10:59:44 -0800

Russel Kinnel at Morningstar compiled a who-is-who list of famous mutual fund managers specializing in domestic stocks:

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The Cost Of Market Timing In Mutual Fund Investing

Sun, 22 Oct 2006 21:25:10 -0800

This New York Times article quoted a revealing study that ordinary mutual fund investors are paying dearly for timing the market.

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Is Bill Gross's Winning Streak Coming To A Close?

Fri, 20 Oct 2006 20:44:57 -0800

Scott Berry at Morningstar wonders if the Bond King will underperform the index this year now that his Harbor Bund (HABDX) returns slightly less than benchmark year-to-date, after many years of superior returns.

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Kiplinger's Pick Of Best Mutual Funds

Fri, 20 Oct 2006 08:04:35 -0800

The list from the renowned Kiplinger's Personal Finance has some good names in it, but I'm very puzzled by why it will set up a "Best Fund Revival" category. Shall we expect consistency in performance for mutual fund picking?]]>

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Ford 401(k) Plan To Drop Fidelity Magellan

Tue, 17 Oct 2006 02:30:41 -0800

Ford followed the decision by Microsoft 401(k) plan administrators to abandon Fidelity Magellan fund (FMAGX). The fund has already lost over 50% of its net assets since 1999. Will it bleed to death before the new manager can enhance its performance?

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What Are Insurance Bonds?

Sun, 15 Oct 2006 20:37:29 -0800

Insurance bonds are offered by a number of life insurance companies. Unlike traditional insurance policies, insurance bonds are far more flexible and work similar to Unit Trusts. Insurance bonds are used to create capital appreciation without any immediate income. Any money made is reinvested until the bond reaches maturity or the bond owner dies.

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What Are Superannuation Funds?

Sun, 15 Oct 2006 20:36:31 -0800

Superannuation funds are a great way to save for retirement. An income is drawn on these investments until the date of maturity which parallels the date of the investors' retirement. Superannuation funds are usually very conservative and low risk. Which is great for investors that want a constant and stable rate of return on their principal investment.

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What Are Unit Trusts?

Sun, 15 Oct 2006 20:36:27 -0800

Unit Trusts collects money from a large group of investors and then uses that money to buy varied investments. The more people you have the better. This allows for all investors to share costs, including commission fees, which means each individual investor pays less out of their pocket for professional advising. When you invest in a Unit Trust you are actually buying unit and each unit has it's own price. As the unit increases or decreases in value so will your investments. The type of investment is extremely popular in today's economic market.

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What Is Group Investment Fund?

Sun, 15 Oct 2006 20:36:27 -0800

Group Investment Fund is similar to a Unit Trust because investors are joining together to create a larger buying power. They also share the cost of profession management. Most group investment funds are based in fixed interest and security type investments. In other words, group investment funds are less varied in their investment types then Unit Trusts.

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What Are Managed Investments?

Sun, 15 Oct 2006 20:36:06 -0800

Managed investments are funds which are coordinated by a professional financial advisor. The advisor's responsibility is to research and then invest in a variety of stock options. Managed investments are a mixture of many types of investment vehicles including stocks, bonds, and mutual funds. The benefit of managed investments is that your money is pooled with the money of other investors. This allows for a large amount of money to be invested, creating a stronger more expansive investment portfolio. For example, New Zealand has large managed funds totaling over $50 billion dollars. There are several types of managed investments that include unit trusts, group investments, superannuation funds, and insurance bonds. Each of these investment types have their own attributes and differ on legal issues, taxes, and ownership. If you are interested in a managed investment program it is important to research each of these and make a decision based on which one fits your needs.]]>

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Mutual Fund Investors: Be Prepared For Your Tax Bite

Sun, 15 Oct 2006 02:51:12 -0800

WSJ tax columnist Eleanor Laise and TomHerman reported that several firms are subject to singificant capital gains payout this year, and investors should think twice before making a late-year purchase.

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Many Fund Manager Changes At Fidelity

Tue, 10 Oct 2006 06:19:38 -0800

Almost two dozen funds at Fidelity changed manager last week. Should you be worried?

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Which Fund Companies Are Really Thinking Long Term?

Tue, 10 Oct 2006 06:13:19 -0800

Morningstar conducted an interesting yet revealing exercise by calculating the weighted turnover by fund companies. Kudos to David Funds, Dodge & Cox and American Funds, who are clearly displaying long-term mentality in investing style.

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Fidelity Reduces Initial Minimum On Its Doner-Advised Charitable Fund

Tue, 10 Oct 2006 04:42:45 -0800

Can you imagine people's generosity? The same WSJ mentioned the balance of all doner-advised charitable funds has grown from $12.7 billion inb 2004 to $15.5 billion in 2005. It is a no-brainer that by giving easier access to these funds, it is a win-win scenario for everybody involved.

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Bond Funds Have Their Own Risks

Sun, 08 Oct 2006 02:12:56 -0800

"Credit risk" This is the risk that the issuers of the bonds owned by a fund may default (fail to pay the debt that they owe on the bonds that they have issued). This risk may be minimal for funds that invest in insured or U.S. Government bonds. "Prepayment risk" This is the risk that the issuers of the bonds owned by a fund will prepay them at a time when interest rates have declined. Because interest rates have declined, the fund may have to reinvest the proceeds in bonds with lower interest rates, which can reduce the fund’s return. (Not all bonds, however, can be prepaid.) "Interest rate risk" This is the risk that the market value of the bonds owned by a fund will fluctuate as interest rates go up and down. Nearly all bond funds are subject to this type of risk, but funds holding bonds with longer maturities are more subject to this risk than funds holding bonds with shorter maturities. Because of this type of risk, you can lose money in a bond fund, including those that invest only in insured bonds or government bonds. A bond fund’s prospectus should disclose these and any other risks.]]>

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Fidelity's Large Funds Lag The Market (FMAGX, FCNTX)

Sun, 08 Oct 2006 01:22:54 -0800

I'm glad I reduced my 401(k) exposure on Contrafund earlier this year. Now it only represents 1% of my overall portfolio.

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Longleaf Funds Are Reopened To Investors

Sun, 08 Oct 2006 01:22:53 -0800

Is it too late to jump onto the international stock bandwagon?

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Biggest Fund Exodus in 2006

Fri, 06 Oct 2006 00:14:23 -0800

Morningstar reported the following 20 mutual funds have the largest outflow so far in 2006. Some of the funds are just out of style, but many are performance driven, like the once famous Fidelity Magellan. 8 out of 20 funds come from Fidelity.

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Morningstar Fund Pick: Fidelity Balanced (FBALX)

Thu, 05 Oct 2006 05:19:11 -0800

I don't usually favor balanced or blend funds. If you need more diversification, lifecycle funds may be a good pick. However, since Morningstar gives this fund a 5-star rating, and it is backed by the Fidelity name, Fidelity Balanced (FBALX) may be worth a look.

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Morningstar Small-Value Fund Picks

Thu, 05 Oct 2006 05:19:09 -0800

Here are the best small-cap value funds recommended by Morningstar.

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Morningstar Large-Value Fund Picks

Thu, 05 Oct 2006 05:19:09 -0800

Here are the best large-cap value funds recommended by Morningstar.

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Morningstar Mid-Value Fund Picks

Thu, 05 Oct 2006 05:19:09 -0800

Here are the best mid-cap value funds recommended by Morningstar.

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What Is A Mutual Fund's R-Squared?

Tue, 03 Oct 2006 00:36:12 -0800

R-squared measures a fund's movements against its particular benchmark index on a scale ranging from 1 to 100. An S&P 500 index fund will have an R-squared very close to 100 because the fund mirrors the index. A fund with a low R-squared number is moving out of sync with its index. A high R-squared means the beta on a fund is actually a useful measurement. A low R-squared means ignore the beta.

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What Is A Mutual Fund's Redemption Fee?

Tue, 03 Oct 2006 00:36:12 -0800

A redemption fee is charged when you withdraw money from a fund. It's different from a back-end load in that a redemption fee goes back into the fund while a back-end load profits the fund company. Some funds will charge you both! A redemption fee is typically charged only if you withdraw your money before a set period. This is done to discourage investors from constantly moving money in and out of funds. However, some funds waive the redemption fee when you move your money from one fund to another in the same family. Adding to the confusion, some stocks in a family may have a redemption fee while others don't. Finally, some families of funds charge an exchange fee when you shift money from one fund to another. Ask about this before you invest in a fund.

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What Is A Mutual Fund's Net Asset Value (NAV)?

Tue, 03 Oct 2006 00:36:12 -0800

Commonly written as NAV, Net Asset Value is the current dollar value of a single share in a mutual fund. It's the fund's assets minus its liabilities divided by the number of outstanding shares. A fund's NAV is calculated at the end of each business day. You can track a fund's NAV like you would the price of an individual stock. If the NAV goes down over time, it's bad; if it goes up, it's good.

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What Is A Mutual Fund's Turnover?

Tue, 03 Oct 2006 00:36:12 -0800

Turnover is a measure of a fund's trading activity based on the number of times a year that an average dollar of assets is reinvested. If a fund has $100 million in assets and sells $50 million worth of securities, the turnover ratio is 50 percent. High turnover can lead to high tax bills, which take a big bite out of your bottom line, unless the mutual fund is in your IRA (and therefore tax-exempt). If your investment is taxable, look for tax-efficient funds.

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What Is 12b-1 Fee?

Tue, 03 Oct 2006 00:35:06 -0800

12b-1 fees pay funds' marketing, promotion and distribution expenses. The fee is named for the line of legislation that made it possible. The 12b-1 fee is included in the expense ratio, so you shouldn't worry about it, right? Ha! The 12b-1 lowers your overall return, and not all funds charge such fees. The argument for these fees is that they are used to sell the fund, which results in more people putting more money into the fund. This allows the fund to lower its cost ratio. By law, the 12b-1 fee can be no more than 1 percent. Don't rule out a fund because it has a 12b-1 fee, but choose funds that charge a 12b-1 of no more than 0.25 percent.

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What Is A Mutual Fund's Beta?

Tue, 03 Oct 2006 00:35:06 -0800

Beta is a fund's volatility measured against the S&P 500 index, which has a set beta of 1. Therefore, if a fund has a beta higher than 1, it means it's moving up and down more than the rest of the market. A fund with a beta of 2 will move up 20 percent when the S&P rises 10 percent. Use a beta this way: In good times, look for funds with a higher beta because you'll get higher returns. In bear markets, look for funds with betas lower than 1. That way, your fund won't have losses larger than the average for the market.

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