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Mutual Fund Management |
This section covers mutual fund education designed to help beginners and professionals alike. There are many aspects of mutual funds an investor should understand before a mutual fund purchase is made.
The information provided below will help you understand the function of management in a mutual fund.
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Costs you Wont Find in a Prospectus Fund Management Styles How an Investment in a Mutual Fund Makes Money Investment Company Act of 1940
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Fund Management Actively managed funds: Mutual Fund managers are professionals. They are considered professionals because of their knowledge and experience. Managers are hired to actively manage mutual fund portfolios. Instead of seeking to track market performance, active fund management tries to beat it. To do this, fund managers "actively" buy and sell individual securities. For an actively managed fund, the corresponding index can be used as a performance benchmark. Is an active fund a better investment because it is trying to outperform the market? Not necessarily. While there is the potential for higher returns with active funds, they are more unpredictable and more risky. From 1990 through 1999, on average, 76% of large cap actively managed stock funds actually under performed the S&P 500. (Source - Schwab Center for Investment Research) Actively managed fund styles: Some active fund managers follow an investing "style" to try and maximize fund performance while meeting the investment objectives of the fund. Fund styles usually fall with in the following three categories. Fund Styles:
To determine the style of a mutual fund, consult the prospectus as well as other sources that review mutual funds. Don't be surprised if the information conflicts. Although a prospectus may state a specific fund style, the style may change. Value stocks held in the portfolio over a period of time may become growth stocks and vice versa. Other research may give a more current and accurate account of the style of the fund. |
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