When it comes to choosing a fund to invest our money, there are so many choices. A fund is a blend of stocks and bonds, that a money manager believes will be successful in creating profits for his investment company and for you the investor.
Many retirement accounts offered at the work place, offer funds that invest your money. A fund is put together with an idea, or game plan in mind. The person that designs the fund is the "Money Manager". When looking at a fund, always start with the person who will be investing your money.
The first place to start is the "Prospectus" of the fund. The prospectus is a document describing the major features of the fund., in enough detail so that prospective investors have a complete over view of the fund. We can look here to find Managment. Management is the Money Manager.
I like to see at least five years of tenure of the Money Manager in the fund I'm considering. With five years tenure of the Money Manager, I have confidence that when I look at the performance of a fund, what I'm seeing is the performance of this particular manager. A new person taking over a fund for the original manager, may have a different style of investing, and ideas different from his predecessor that could change the future results of the fund. With a new manager, we have no idea of how the fund will perform going forward.
On the subject of Money Managers for a fund, be sure to locate a name or names of those managing the fund. Sometimes you will see something similar to "team" as the manager. Without a name we have no way of learning about the track record of the money manager. The money manager is the person you give your money to for investing. You are trusting on the knowledge and experience of this person to increase your wealth. When a fund offers no clear name of the manager, it's time to continue on to the next fund.
As I pointed out earlier, the prospectus will tell you who the money manager is, but google will do the same for you. Just go to http://www.google.com/ and type in the 'symbol' of the fund for a search. An example would be 'FCNTX' for FIDELITY CONTRA FUND. You will always need the symbol to do any research of a fund. The hand out you get from the investment company provided by work, or in the mail when you request it be sent to you, will provide the information you need. You can also go online to the site of your work provided retirement account for the information on the funds offered.
Google will provide you with the name of the fund, so you can be sure that you're looking at the correct fund information. A list of links is provided for you to choose from; Google Finance, Morningstar, Yahoo Finance, MSN Money, Daily Finance, and Reuters. Click on Morningstar. Morningstar provides independent and trusted mutual fund analysis, research, and ratings of the many funds available. If you wish, you can go directly to http://www.morningstar.com/.
The Morningstar page will provide the current value of the fund, NAV $64.36. The letters 'NAV' next to the price amount is Net Asset Value. This represents a fund's per share value. You don't buy funds by the share as in stocks, rather by a lump dollar sum such as $1000.00.
The Morningstar site provides the investor with information on how the fund is doing. Remember that the information is always 'past performance', and cannot guarantee future performance. Like a great football team, sometimes they lose, but in the long run they are winners, winning much more consistantly than the rest.
A chart is provided for you to see how well or poorly the fund has done over an eight year period. The funds performance record from a most recent year to ten years going back is shown. We are looking for consistant growth (making money).
The Funds Top Holdings
A fund is a mix of stocks and bonds, we want to see what is inside the fund. For example if the fund has a heavy percentage of morgage related stocks, today that would not be a good choice because of the current morgage problems. The funds top holdings will show the percentage of investments the money manager believes will creat profits for the investor.
Asset Allocation will tell you where your money in the fund is invested. Items include Cash, Stocks, Bonds, or Foreigh Stocks.
Management; Gives you the name of the person investing your money. This is the important one.
His/Her Tenure is important. Look for 5 years or more, I explained this earlier.
Total Assets; provides you with the total dollars invested in the fund. This is the size of the fund.
Top Sectors; Sectors are distinct subset of the market whose components share similar characteristics. Example would be the Technology sector. In this sector you would find computer makers, memory makers, and companies like Microsoft, and Google. These are just some of the many companies in this sector. These are all in a similar field. The market has 12 sectors or parts. By going to http://www.msn.com/ at the money/investment part of the site, you can easily learn the top 50 holdings (investments) the fund contains.
Dividends and Capital gains distributions. Capital gains is a profit in this case from stocks and bonds in the fund. Dividends are payments made to share holders of stocks (like getting interest). Dividends are the portion of corporate profits paid out to stock holders. Here you will learn what percentage the fund will pay to you.
You can also learn how big (size in dollars) the companies are, that the fund is investing your money into. You will see;
Large Cap, companies with a market capitalization value of more than $10 billion.
Mid Cap; A company with a market capitalization between $2 and $10 billion.
Small Cap; a company with a market capitalization of between $300 million and $2 billion.
Value; A stock that tends to trade at a lower price relative to it's fundamentals (ie dividends, earnings ...)
Blend; Blend funds, contain only stocks and no fixed-income securities (bonds), but holds a mix of both growth and value stocks.
Growth; Shares in a company whose earnings are expected to grow at an above-average rate relative to the market.
The most basic starting point in looking for a fund to place your money, is the portfolio manager, or money manager both names are the same person. This is the person who will be doing all the thinking for you in the fund you choose to place your money. If you pick a winning money manager your account will grow, but if the money manager is a poor performer, then your retirement account will suffer.
The information you need to be a superior investor in stocks and funds is available at http://www.youcontrolinvesting.com/. We will be happy to provide you with your first lesson free of charge, to begin you on the road of financial success. Visit our site and see how easy investing with confidence is. Just ask for your free 'Lesson 1' at our site or by email; Bruce@YouControlinvesting.com
Good investing,
Bruce Cortez
Visit www.Twitter.com/StockMktTeacher for daily market information, with stock ideas, teaching and more.
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Theirs no best fund.
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