1. Historical Performance Vs. Underlying Portfolio Characteristics
  2. Mutual Fund Performance Data
  3. Fund I-Q No.7: Comparative Total Returns
  4. Scoring Fund Performance Data

By Richard Loth (Contact | Biography)

Many investors tend to focus on a mutual fund's historical performance as oppsoed to considering its underlying portfolio characteristics. With individual investors, whether these are stock, bond, or fund investors, return is the holy grail of their approach to investing. However, while an investment's return is certainly an important consideration, it would be best to first start with looking at an investment's fundamentals. After all, strong, consistent investment qualities are what produce top-rated investment performance, not vice versa. (For more insight, read The Truth Behind Mutual Fund Returns.)

With mutual fund investing, it is particularly important to look at all the components of investment quality and not just performance alone. There is too much hype and misleading information in mutual fund advertising. In this regard, the most abused metric in fund marketing materials is performance data.

The financial media continuously bombard us with what's "hot," be that a particular fund or fund category. The personal finance magazines are filled with eye-grabbing headlines about what to invest in now, next month and next year. The pervasive investment community habit of focusing on the short-term displaces investment fundamentals for big, immediate returns as selection criteria.

Too many mutual funds enjoy a very short period of success. The record books are full of superstars that disappear from one year to the next. Therefore, remember these two key points when considering fund performance as an investment quality:

  1. Top performance is the product of favorable indicators.
  2. To rely on performance figures, they need to be established over a relatively long period of time.
Return to the Main Menu.
Mutual Fund Performance Data

Related Articles
  1. ETFs & Mutual Funds

    How to Rate Your Mutual Fund Manager

    What to really look for when you're deciding on a mutual fund.
  2. ETFs & Mutual Funds

    A Mutual Funds Guide for Young Investors

    Learn 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.
  3. ETFs & Mutual Funds

    4 Mistakes to Avoid When Choosing Mutual Funds to Invest in

    Mutual funds are a great way to build wealth but not all of them are the same. Investors have to be mindful of fees, turnover, redundancy and performance.
  4. Investing

    Advising FAs: Explaining Mutual Funds to a Client

    More 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.
  5. ETFs & Mutual Funds

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  6. ETFs & Mutual Funds

    The Benefits of Picking Mutual Funds Over Individual Stocks

    Learn about the advantages of investing in mutual funds rather than individual stocks, including the benefits of affordability, oversight and diversification.
  7. ETFs & Mutual Funds

    Mutual Funds Are Awesome - Except When They're Not

    This investment is very popular, but that doesn't mean it comes without risk.
  8. ETFs & Mutual Funds

    Mutual Fund Investment Quality: Conclusion

    Check in here for an overview of mutual fund investment quality and how to find it.
  9. ETFs & Mutual Funds

    5 Secrets You Didn’t Know About Mutual Funds

    Learn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
  10. Managing Wealth

    Mutual Funds: Different Types Of Funds

    No matter what type of investor you are, there is bound to be a mutual fund that fits your style. According to the last count there are more than 10,000 mutual funds in North America! That means ...
Trading Center