What factors should investors consider in determining the long-term
profitability of a mutual fund? Selecting the best mutual fund to add to
your portfolio requires analysis of the fund’s structural
characteristics: the size and age of the fund; its cash position;
portfolio concentration; and market capitalization.
What to Look For When Researching Mutual Funds:
Size and Age
In selecting a mutual fund, it’s important to evaluate how the fund has
performed over longer periods, and how it has weathered the ups and
downs of the market. Ideally, the best mutual fund selections include
those that have withstood the test of time, and have continued to be
profitable despite its size. With more established funds, investors and
analysts can review how the fund managers and strategy of the fund
performed in a variety of market conditions. Combined with other
analytical tools, this can be useful in determining the appropriateness
of a mutual fund.
Cash Position
It’s also important to determine the fund’s cash reserves. If a fund
rapidly develops a huge cash reserve, it could be a sign that the fund
manager is unable to control the money coming in, and thus, the fund is
not maximizing its investment opportunities.
Portfolio Concentration
Among the fundamental basis for investing in a mutual fund is reaping
the benefits of a diversified portfolio. However, studies have shown
that the sometimes best performing mutual funds are those that exhibit
more industry or style concentration.
Market Capitalization
Understanding a fund’s market capitalization can also be a good
indication of a fund’s investment emphasis, as well as the risks that it
assumes. Market capitalization is computed by multiplying the number of
outstanding shares by their current market price.
Please Note: As with any investment, it’s important to remember that a
fund’s past performance is no guarantee of its future success.
We Can Help You Evaluate and Select Mutual Funds
Step 1: Contact us and provide us with information about your financial situation or copies of your statements
Step 2: Complete a Financial Plan Questionnaire
Step 3:
One of Atlantic Financial's Financial Advisors will contact you with detailed recommendations
about your portfolio.
Call Atlantic Financial toll free at 800-559-2900,
(please be sure to include your name and phone number in your email) or
submit the short form below:
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Mutual Funds:Portfolios and Market Capitalization
