Will Top performing Mutual funds Continue to out perform in future?
Note: If you don't have the patience to read the most critical points in buying mutual funds described below, go ahead and click the links at the bottom of the page for top performing mutual and etf funds
If selecting mutual funds are as easy as investing in those with the best past performance, most of will be millionaires. Many of us are guilty of the stupidity of chasing the top performing Mutual funds. How many times did we beat the market?
You have read this several times- Past performance does not guarantee future results. Is past performance really indicative of future results? Most mutual fund companies boasts about their top performing mutual funds. You can see their 5 or 10 year average annual returns in graphs and numbers. They describe how their fund managers are smart enough to beat the S&P 500 Index. But if you read the fine print it says, Past performance does not guarantee future results.
What to look for when choosing Top performing Mutual funds?
When selecting mutual funds, make sure that you are not using past performance as your single measure for selection. While it is completely reasonable to analyze the long-term (10 years) performance of the fund, some of the most critical factors in fund selection are:
What are the expense ratios?
Turn Over ratio of funds
The Mutual fund cash reserve should not exceed 5%. Higher cash reserves indicates ineffective use if capital (dead capital) and lost revenues
Fund past performance
Analyze the following
- How well did the fund performed during both bear and bull markets?
- How does the fund compares against the competitor’s fund?
A mutual fund's past performance track record is less important compared to the other factors described above. Many funds that outperform the stock market return in 10 years could go down in the next 10 years. Compare a fund's performance not only against S&P 500 but also against funds that have similar Morning star style box funds. Make certain to analyze the stability of the fund's returns that you are buying. You want funds that have demonstrated excellent returns over a long period of time (at least 10 years) as well as on a consistent basis, rather than ad hoc returns- ups and downs like a seesaw curve
Now use the link below as ONE of your factor and NOT the only factor. Click on the link below on the top performing mutual funds. DISCLAIMER: Past performance does not guarantee future results!