A high turnover rate is not something you want in a stock fund. Let’s look at performance numbers to see why. When fund managers frequently trade a stock fund, it produces lower returns than if they trade less than 15% each year.
Greece’s dilemma underscores, once again, the sad truth about when unbridled debt goes wrong: Someone, and maybe everyone, will end up suffering. Those who think financial machinations, like more bailouts, can fix the problem are kidding themselves.
Bond funds are not the place to be if interest rates start to rise in earnest. Unlike buyers of individual bonds, who can ride out the resulting value drops until their holdings mature, fund investors can get slammed. Their funds, which must routinely buy and sell underlying assets, suffer the full force of the price drop.
You hear advisors on TV talking about how they research and pick the securities with the highest returns. That sounds good since who doesn’t want the best? Why not jump in and catch the wave? Here are three reasons why not.
My toddler son spends long stretches every day hitting a foam golf ball around the yard; occasionally we visit a local pitch-putt course where he brings just his putter and his driver clubs. This simplistic approach to the game has drawbacks, of course, and in that way parallels a popular investment vehicle: the target date mutual fund.
The psychological urge to move on is ingrained in the American character. As investors, this compulsion does us no favors when the stock market is hot and we chase the top performers, or when it’s plunging and we flee longstanding holdings.
Fortunes change for mutual funds, even the best ones. That’s true for funds that seem to be alike. Subtle differences, however, can spell a noteworthy divergence in performance. A case in point is the contrast between good funds from Dimensional Fund Advisors and Vanguard Investments.
Do you collect mutual funds? Unlike hobbyists who collect stamps, art or rare coins, investors who own a multitude of funds are not better off.
Your mutual fund managers and their strategies are not to blame for your mediocre return. People trail their own funds because of performance chasing - the biggest mistake investors and advisors make.
Rebalancing is the process of buying and selling assets to move your portfolio in alignment with its original target allocation. Restoring your mix can both boost returns and lower volatility, but most investors do not understand how.