Many types of mutual funds are available. The fund you select should reflect your personal investment objectives. Our investment representatives can help you determine your investment objectives and select a mutual fund that matches them.
When determining which fund is best for you, there are four main things to consider: the history of the fund, the current management of the fund, the philosophy of the fund and the fees and risks associated with the fund.
First, many investment companies, banks and other financial institutions sell mutual funds. You may want to consider whether the company or fund has an established history of making good investments and achieving satisfactory levels of return.
Second, the management team of any fund has a direct impact on the success of the fund because their decisions determine what securities are bought and sold. Index funds that track a benchmark such as the Standard & Poor's 500 Composite have no direct management and therefore move synchronously with their indices.
Third, you many want to invest in funds that focus on or specialize in a particular industry. Other funds, such as those that invest in the Far East, have a regional focus. You may also wish to invest in funds with a particular philosophy, such as protecting the environment by investing in 'ethical' or 'green' funds. Sectoral, geographic or philosophic specifications for a fund limit managers' abilities to invest and therefore add risk and/or reduce potential gains. However, with careful construction, a portfolio of specialized funds can outperform broadly diversified funds.
Fourth, you should consider what fees the company charges for managing your money. Funds are usually sold on a load or no load commission basis. If a fund is front-end loaded you are charged a purchase commission when you buy the mutual fund. With a back-end loaded fund, you are charged what is generally a higher management fee and penalized if you redeem your units prior to the elapse of a penalty period that is usually 5 to 7 years. Most funds also charge monthly management fees. Bear in mind that there is no relationship between fees and performance. However, in selecting funds, one must decide what level of risk is acceptable for your investment.
These decisions are critical, for merely investing in recent high performance funds has been shown in numerous studies to be nothing but a way to lose money. Mutual funds and other investment portfolios from billion dollar pension funds to private investors' accounts lack persistence of performance. In other words, the stocks or bonds that did well or outperformed the market in a previous period are unlikely to do so in the next period. Investors therefore need careful, professional work in constructing a durable portfolio, just as much as they would need careful and professional trades in building a house.
NOTE: Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.