Mutual Funds Getting into the game

Mutual Fund Performance Reporting  WSJ  Any financial site (yahoo.com)

How to Buy  Going through a broker: –Example: Schwab:  Direct: –Example: Fidelity:  Fidelity funds: common/allopenanaccount.asp common/allopenanaccount.asp  Funds Network:

How to Buy (cont.)  IRA –Same as stock brokerage account  401(k) –Depends on your company

Review of reputable mutual fund companies  Leaders: –Fidelity –Vanguard –Janus –Aim –Twentieth Century –Oppenheimer –Wasatch (a great small mutual fund company)

Danger Signs  Change in management  Prolonged sub-S&P500 performance  Changes in the sector or industry  Net fund inflows or outflows are NOT correlated to performance, necessarily

Things to look for  Management track record  Forecast for sector or industry  Low fees  Tax efficiency  Watch out for layered fees that may occur if you go ‘through’ a third party to get the fund shares  Remember that gross returns do not equal net returns

The 401(k) Reality  Limited number of funds, what do I do? –Participate and get the matching anyway  If you leave, you can roll the assets to an IRA that may have unlimited access to funds –Screen the investments you do have  Use your friend morningstar.com –Lobby for more choices  This works, but it takes time

Re-Evaluation  Should be done annually  Doing this too often can prove dangerous: –Survey of returns from  Market returned 16%  Mutual funds 16%  Mutual fund investors 5.3% –Chasing mutual funds is a poor strategy