Mutual fund companies and retirement plan providers generate a huge amount of fund literature. While marginally useful, this material cannot come close to providing individual investors with what they need to know when it comes to making a buy, sell or hold decision on a mutual fund. (For more insight, see When To Sell A Mutual Fund.)
The material provided by the fund companies (prospectus, annual, semiannual and quarterly reports, and the statement of additional information) is obligatory disclosure information. However, even investment professionals feel that a great deal of this documentation is mostly unintelligible. The glossy brochures and fund profiles produced by retirement plan providers usually get an "A" for the graphics but are short on substantive, insightful content. In fact, many of them have a certain boilerplate quality about them.
According to David Swenson's book, "Unconventional Success: A Fundamental Approach To Personal Investment" (2005), a typical mutual fund has volumes of reading material. Figure 1, below, shows the number of pages from five typical mutual funds.
|Source: "Unconventional Success" (2005) by David Swenson|
These items total a mere 852 pages for five mutual funds! Compared to five one-page fund reports available from the investment research firms mentioned above, the alternative choice is an easy one.
To find investment quality in a mutual fund, non-professional investors need the analytical perspectives provided by Morningstar and Value Line. These reports, and their targeted evaluative data (which is used in a Fund Investment Quality Scorecard), enable an individual investor to make smart mutual fund choices.
Without doubt, a fund report is the most efficient and effective way to research a mutual fund's investment quality. However, there are also a number of good general investment information websites that can help investors improve their overall mutual fund investing skills.
The American Association of Individual Investors (AAII) publishes its Guide to the Top Investment Web Sites annually in its September issue of the AAII Journal. Its picks for top sites for mutual fund data in 2007 included the following free - either totally or partially - sites:
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 AdvisorLearn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
InvestingLearn about the advantages of investing in mutual funds rather than individual stocks, including the benefits of affordability, oversight and diversification.
RetirementMutual funds are still widely used in retirement plans, but they may be losing their appeal. Find out if retirement mutual funds should be in your portfolio.
InvestingThis investment is very popular, but that doesn't mean it comes without risk.
InvestingFind out why trading mutual funds for a living isn't your best bet, including how funds discourage short-term trading and which options may better serve you.
InvestingReview the liquidity features of mutual fund shares and an overview of Fidelity mutual funds. Most investors look for convenient access to their investments.
Financial AdvisorMutual funds are the starting point for many individual investors because they offer a balanced portfolio in a single investment. Find out how mutual funds work and whether they are the investment ...