Fund Funds Mutual Funds Investing Money Wealth Wealthy Mutual Fund Performance

Mutual Funds are a great way to build wealth.

I know some of you may be saying “I don’t have enough money to invest in Mutual Funds.”  Actually 401k plans are simply a combination of Mutual Funds, so if you are in your 401k plan at work, then you are investing in Mutual Funds.  If your company offers a 401k plan, I strongly encourage you to invest in it.

Whether you are investing in a single independent Mutual Fund or investing in your 401k plan, the same basic principals should apply as you make your selection.  There are 4 key areas to look at, in my opinion.  The Fund Manager, Fund age, performance and recent performance. You can find all of this information on line, most of it on Yahoo Finance. Simply go to Yahoo Finance and type in the ticker symbol in the box in the upper left hand corner where it say “get quotes”.  You can easily get the ticker symbol by typing the name of the Mutual Fund in the search box of your computer.  A series of letters will appear.  For example Franklin Custodian Growth Fund is FKGRX.  I will be using this fund as an example.

1) FUND MANAGER.  The Fund Manager should be someone with experience.  As you look down the left hand column, you will see “FUND” and under that will be “Profile”.  Click on “Profile” and scroll down the page.  You will see a brief history of the current manger.  In this case, the manager is currently Vivian J. Palmieri, who has been lead manager since March 1965.  Even though Vivian must be pretty old, the fact that she has been lead manager since 1965 shows stability and that’s a good thing.  You should make sure that the lead manager (in my opinion) has at least 10 years experience.

2) FUND AGE.  You are looking for a Fund that has been around for at least 10 years and the longer it has been around, the better.  On the same page where you found the Fund Manager, you will see at the top of the page a box that says “Fund Overview”.  In that box it will tell you when the Fund began.  In this case, the Fund began on March 30, 1948.  That means it as been around a while and has survived through difficult times.  I survived the Korean War, the assassination of President Kennedy, the Vietnam War, the fuel crisis of the 1970’s, the resignation of President Nixon, recessions and the attack on The World Trade Center.

3) FUND PERFORMANCE.   As you look under “FUND” and then “Performance”, you will see “Performance Overview”.  What you are looking for here is the number of years up and the number of years down.  This Fund has had 50 years up and 12 years down.  That means that just over 80% of the time, it is making money.  That is pretty solid growth.  The next information is not available on Yahoo Finance so you will have to go directly to the fund site.  Simply type in Franklin Funds in the search box.  You will find Franklin Templeton Investments.  When you go to the Franklin Templeton site, look for Fund Performance and then type in the ticker symbol.  In this case, you will find that since the inception date of March 1948, this Fund has averaged 9.93% growth as of the writing of this article, which is March 14, 2011.

4) RECENT FUND PERFORMANCE.  Again, on Yahoo Finance under “Fund” and then “Performance”, as you scroll down, you will see “Load Adjusted Returns”.  This will give you an idea as to how the Fund has done lately.  It will show you the 1, 3, 5 and 10 year performance.  If a Fund has averaged 10% growth but in the last 10 years has lost money, you probably want to stay away from it.  You also want to be wary of a fund that has lost money in 2 or more of the 1, 3, 5 and 10 years that are reported.  In the case of this Fund, it’s returns have been 13.15%, 3.17%, 3.82% and 3.04%.  It has made money in each of the reported periods. 

In analyzing this particular Fund, in my opinion, it is a good Fund.  It has a stable Lead Manager with nearly 50 years experience, the Fund has been around for 63 years, has made money recently, has had growth 80% of the time and has average 9.93% growth since the Fund began.  If you invested $2,000 per year in this Fund every year from the time you are 20 until you are 60, you will have over $1,000,000!