By Richard Loth (Contact | Biography)
According to the 2005 Investment Company Institute Fact Book, nearly 600 financial intermediaries in the U.S. and around the world compete in the U.S. mutual fund market. It is estimated that, as of year-end 2004, the top 25 of these firms held 74% of this market's $8.2 trillion total assets under management.
The 8,000 plus publicly traded mutual funds in the U. S. break down by type as follows:
It is a huge understatement to say that for the investing public, this number of fund choices is absolutely overwhelming.
It is important for fund investors to appreciate the importance of investing in funds that are sponsored by financial intermediaries in good standing. That is to say, that they are not saddled with regulatory problems resulting from questionable management practices and governance problems. The serious mutual fund scandals of 2002 and 2003 are, hopefully, behind us. However, it is prudent for fund investors to maintain a watchful eye in this area.
Investors should start by screening for those fund sponsors that are scandal-free and that do a good job of aligning their interests with those of their fund shareholders. Professionals in the mutual fund industry refer to this as good stewardship. The most accessible source of stewardship grades is a Morningstar Fund Report. Morningstar's grading of fund sponsor stewardship has become an important part of its evaluative reporting on the mutual fund industry. (For more insight, see Morningstar's Stewardship Grade Service A Welcome Addition.)
It is natural that opinions will differ on fund-sponsor quality. However, it is worthwhile to note that there appears to be a connection between high quality fiduciary management at the fund sponsor level and high quality investment performance at the individual fund level. (For related reading, see Picking The Right Mutual Fund.)
Return to the Main Menu.
Fund Investment Qualities
InvestingMorningstar's service gives investors an idea how well fund companies are safeguarding their interests.
InvestingLearn some background on mutual funds and what factors can be used to assess their investment quality.
Financial AdvisorLearn how mutual funds work, why they are so popular and how younger investors can get started by putting mutual funds in their IRAs or 401(k)s.
Financial AdvisorMore than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
InvestingMutual funds are a good investment opportunity, but investors should know how they operate.