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Mutual funds - How to Evaluate Fund Performance



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even seasoned investors and financial

advisors would testify that judging

mutual funds based on performance is

quite complex is almost traditional to

look at past performance and trying to

choose a mutual fund but there's a catch

past performance does not mean it will

perform the same now or in the future

statistically there is no strong

indicator that good performing funds

will continue to perform well or even

better

in fact many top performing funds do not

remain on top or near the top for a very

long time conversely many poorly

performing funds do improve while others

continue to labor using other tools

would help you in making your selection

for example you can use a morning star

rating or check out the long-term

performance of a fund to filter your

field of choices with this tool you can

skip the funds with a long track record

of poor performances or those that may

be at risk of closing or merging with

other funds watch out too for funds

whose performance swing excessively

because they are far riskier than most

funds let's see how to measure

performance while reliance on past

performance is very tricky measuring

performance is as simple science they

basically measure the average annual

return of the fund nothing more nothing

less our investing calculators offer a

free online mutual fund evaluator tool

that can screen for funds according to

the filters you want they usually use a

setting of three years so you can have a

better appreciation of how the funds

turned out you can filter them according

to ranking risks yield fees or even

according to popular picks by their

analyst it would be good to know that

the morning star rating is quite

elaborate Morningstar gives a rating to

a fund only after at least three years

of existence on top of this their rating

system considers factors such as account

loads sales fees and redemption fees

they also rewind at the risk adjusted

performance of a fund using three five

or ten year periods and measure the

results across these time periods

depending on the term of the fund the

rating system also counterbalances costs

and consistency of performance so if

they give a higher rating to a fund this

indicates that the performance has been

more consistent

in case the fund shows a bigger swing

and performance in relation to their

pairs their rating will in a fact get a

penalty of sorts the rating will suffer

more these swings are more on the losing

side

that's it for now on our website you can

find more posts as well as calculators

and other financial tools considering a

mutual fund investment we would love to

know your thoughts so feel free to share

them on the comments below I hope you

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