3 Reasons Why Your Mutual Fund Returns Will Always Stink
Getting good returns on your mutual fund might seem like a joke these days. Many mutual funds have pretty poor performance, and there are a few reasons why. Government regulations have a lot to do with it, and the industry has gotten lazy and inefficient. As a result, investors have suffered with returns that barely match inflation.
There are some ways that you can try to boost your fund's returns, but, don't look for these products to be the end all, be all that they are pitched as.
The first step in boosting the returns on your mutual funds is by ignoring the 1, 5, and 10 year historical returns that are posted by the fund company. Most of the time, these numbers are inflated anyway by showing you the simple average as opposed to the effective yield.
If you have a scientific calculator or a lot of time on your hands to do it manually, you can calculate the compounded return over time for these (or any) investment.
The second step in raising your mutual fund's return may be just to sell the fund. I know that's not really boosting the return of the fund, but you may be better off investing in something else. Actually, that's one of the basic rules of investing: understand what you are investing in. Unless you understand every business that that mutual fund holds, you are asking for trouble. You're not being a smart investor, you're just guessing.
One final way of getting more out of your fund is to choose funds that invest in small cap companies. You could also do well by just investing in smaller funds. A smaller mutual fund would probably be the essential point here. Think about how easy it would be for a mom and pop shop to double in size as versus a giant corporation like Walmart.
There are some ways that you can try to boost your fund's returns, but, don't look for these products to be the end all, be all that they are pitched as.
The first step in boosting the returns on your mutual funds is by ignoring the 1, 5, and 10 year historical returns that are posted by the fund company. Most of the time, these numbers are inflated anyway by showing you the simple average as opposed to the effective yield.
If you have a scientific calculator or a lot of time on your hands to do it manually, you can calculate the compounded return over time for these (or any) investment.
The second step in raising your mutual fund's return may be just to sell the fund. I know that's not really boosting the return of the fund, but you may be better off investing in something else. Actually, that's one of the basic rules of investing: understand what you are investing in. Unless you understand every business that that mutual fund holds, you are asking for trouble. You're not being a smart investor, you're just guessing.
One final way of getting more out of your fund is to choose funds that invest in small cap companies. You could also do well by just investing in smaller funds. A smaller mutual fund would probably be the essential point here. Think about how easy it would be for a mom and pop shop to double in size as versus a giant corporation like Walmart.
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posted by Credit Counseling at
7:18 AM
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