This document provides information on researching and selecting mutual funds. It discusses key metrics to analyze, including performance, risk, portfolio management, and other factors. The document instructs the reader to use the Morningstar website to look up specific mutual funds and fill out a spreadsheet analyzing 1-year, 3-year, 5-year, and 10-year returns, risk metrics like worst year performance, as well as portfolio characteristics, management tenure, and other data points. Comparing metrics across funds can help determine which provide the best risk-adjusted returns.

1. What Is a Mutual Fund
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Portfolio of marketable securities (stocks, bonds,
money markets).
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The portfolio is actively managed and does
change.
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Professionally managed by highly qualified
investment professionals.
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Can be monitored and is priced at the end of the
day.

2. How Do You Make Money in Mutual
Funds?
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Capital appreciation ( fund price increase)
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Short and long-term gain distributions
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Dividends
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Reinvest, more shares

4. Morningstar
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Excellent mutual fund research tool
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Free
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Here is the link to access Morningstor
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http://www.morningstar.com/

5. Mutual Funds to Research
(use mutual funds below for your research)
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Fidelity Contrafund (Symbol FCNTX)
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Manning & Napier World Opportunity (Symbol EXWAX)

6. Study FCNTX
1)Go to Morningstar website, Slide 5
2)Place symbol, FCNTX in “Quote”box
3) See slide 9 for FCNTX investment data

7. How to Select a Mutual Fund
Morningstar - Mutual fund research
• Performance
• Management tenure
• Risk
• Portfolio Management - Style, methodology,
investment philosophy

8. Morningstar Tabs
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We will master the circled tabs (see slide 8)
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9. Performance (1)
The 3 most important criteria for investing in a
mutual fund are:
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Performance
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Performance
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Performance
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Our mutual fund analysis focus should be on
performance.

10. Performance (2)
Below are the variables we want to analyze when it comes to
performance:
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We want to take a look at long-term performance. Most market and
economic cycles last 3 to 5 years. We want to know how the mutual fund
performed during an economic, market cycle (to be discussed in future
lessons).
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If the mutual fund does not have a 5 year track record, then do not
consider the fund as an investment. “When in doubt – STAY OUT!!”
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Look at a 3, 5 and 10 year track record.
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We also want to compare to the general market track record like the S &
P 500 index (a proxy for the market, companies in index represent the
economy).

11. Performance (3)
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Build a spread sheet with the following fields, I included S & P's
performance:
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Now, go to Morningstar and fill in the spread sheet with the
performance numbers for FCNTX.
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12. Performance (4)
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Enter the symbol FCNTX into the quote box (circled).
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Once you have the FCNTX page on your screen, click the performance
link (circled).
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Here is the page you should be seeing:
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13. Performance (5)

14. Performance (6)
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Notice the annual history. What was the best
year, the worst year. We will discuss risk in the
fourth lesson of this course.
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Next look at the “Trailing Total Returns” section,
especially the 3-Year, 5-Year, 10 Year returns.
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Use the information on the page to fill in the
returns on your spread sheet.

15. Performance (7)
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Here is what your spread sheet should look like:
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Pick two mutual funds from slide 6 and analyze
their performance using your spread sheet.
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Once your done, which mutual fund would you
invest in, based on performance?
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16. Management Tenure (1)
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Performance may not belong to current portfolio
manager.
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Check management tenure by clicking
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“Management' link.
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The link also provides a bio of the portfolio
management team

17. Management Tenure (2)

18. Management Tenure (3)
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Performance is attributable to current lead
FCNTX manager.
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If the performance is good, and it's not the work
of the current manager, then
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“When in doubt – Stay out”.

19. Risk (1)
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If two mutual funds have the same return,
choose the one with the least risk.
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Build a 'RISK' tab on your spreadsheet with
following columns:

20. RISK (2)
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There are many ways to measure risk.
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How did the fund do in bad market years?
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It's not too hard to make money when the market is up, it is much
harder to manage money when things are bad – a bear market.
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I will develop a course on market, economic, interest rate, and
political cycles. The focus will be on bull and bear markets. The
most money can be made at the beginning and end of a market
cycle.
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21. RISK (3)
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Here is a history of bear markets for the U.S.
(yellow = no recession post WWII):
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22. RISK (4)
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Fortunately, the market spends more time up, versus down.
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The last 35 years there was 29 up years, 6 down years.
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23. RISK (5)
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2008 was one of the worst bear markets in
history.
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From the performance page of Morningstar, fill in
the worst year (2008) for FCNTX
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Next go to the “Ratings and Risk” link.
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24. RISK (6)
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Below are data points (circles) we need:
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25. RISK (7)
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Here is what your spread sheet should look like:
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Provide the risk metrics for the mutual funds you
have performance numbers for.
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Which funds have the lowest risks? Which have
the highest returns? Which has the best

26. RISK (8)
LESSONS
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Adjust returns to risk
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Look at the worst year, do you have the risk
tolerance, conviction, stomach to endure a bear
market.
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The higher the return the higher the risk, the
lower the return, the lower the risk.
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You need to find the appropriate risk and return
for yourself.

27. Portfolio Management (1)
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There are many ways a portfolio can be
managed.
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Mutual funds have a charter on how money will
be invested. It is spelled out in their prospectus.
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This lesson will be about portfolio management
and the metrics that you can analyze to help you
invest in a mutual fund.
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28. Portfolio Management (2)
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Let's build a tab for this analysis. Here is what it
should look like:
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29. Portfolio Management (3)
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There are many types, categories of mutual
funds (growth, value, balanced, energy precious
metals, bonds, international, emerging markets...)
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Below is data from the quote page that includes
the category for FCNTX. Fill in the spread sheet.
What is the category of the other mutual funds
you're analyzing?
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30. Portfolio Management (4)
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I think it's important to compare the Price Earnings ratio, P/E (I will
explain the importance of the P/E in security analysis course), to the
growth rate. The P/E should be no more than 2 times the growth rate.
You can get this data from the “Portfolio” link. Below is the data we need,
the P/E (first item) is 11.39, long-term earnings% growth is 7.73. This
valuation is reasonable. The portfolio manager is not paying too much for
growth.
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By the way, the other valuation metrics listed for FCNTX are reasonable.
They are investing in undervalued stocks.
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31. Portfolio Management (5)
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In slide 3, one way a mutual fund makes money is the dividend.
The dividend can be found on the quote page, see below. The
yield, dividend is .34%. This is a very small yield. Most of the
money made will be short and long-term profits and appreciation.
Add this number to your spread sheet.
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32. Portfolio Management (6)
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The Morningstar portfolio link will provide us more information on
how the portfolio is managed: The information below shows
portfolio allocation. Use this information to fill in columns G, H of
your spread sheet.
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The portfolio has no cash (a cash cushion this late in the cycle
would be a good thing), is made up of domestic and foreign stocks
and are giant and large companies (market capitalization)

33. Portfolio Management (7)
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Style can tell us if a portfolio is conservative or aggressive. Small
stocks managed for growth would be considered aggressive. Large
stocks managed with value in mind would be considered
conservative. The Portfolio Morningstar link does have this
information. The style boxes indicate there is no style drift ( to be
discussed in meeting/class)
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34. Portfolio Management (8)
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Slide 19, management tenure, if the performance belongs to
current manager, then we can consider the mutual fund as an
investment. Now we can enter management tenure and bio info
into the spreadsheet.
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Here is what the Portfolio Management tab should look like:
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Overall FCNTX is conservative (P/E to Growth, Value, Large Cap).
Concentration in one industry would be considered risky.
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35. Other Metrics – Misc.
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I believe the three most important criteria for mutual investing are
1. Performance 2. Tenure 3. Risk
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The last metrics we will look at can also help you pick a mutual
fund.
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Most of these metrics, charts can be found on the quote page:
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36. Other Metrics – Misc.
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Size – Funds that are too small (less than $300 million) tend
to have larger fees and more volatile . Funds that are too
big(over $20 billion) tend to be conservative and normally
have lower performance.
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EXP% - To some investors, expenses/fees are very
important and should be low. I believe performance trumps
fees. If the manager is good, they are worth paying for.
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T/O – Turnover tells us how often the portfolio changes over
a year. FCNTX has a 45% turn over means the portfolio
changes about every 2.22 years (1 year divided by 45%). A
T/O low figure (< 1) normally means the portfolio is managed
conservatively . A high T/O figure (>1.5). means the portfolio
changes are a lot, and this is risky.

37. MISC- PRICE ANALYSIS
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A picture is worth a thousand words. Since this is true it is important to look at a chart of
the price action of the asset/mutual fund.
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What do you see in this chart?
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38. MISC- PRICE ANALYSIS
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Here are a few observations that I have made:
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The fund had a dramatic collapse in 2008 during the “financial crisis”
that started in 2008.
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The fund has more than doubled (from $15 to $35) in about 2 years.
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The fund looks like it has resistance (selling) at the $35 area.
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Notice that before the fall, the fund moved sideways from around the
$30 to $35 areas. Also, notice that prices moved sideways last year from
around $23 to $27. Most asset prices spend a lot of time going sideways.
I will have a separate course on price analysis.
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When an asset has moved this much in a short period of time, start with
a small amount and then invest again on a pullback. We might be able to
add at the low $30 area if prices follow the same patter before the bear
market of 2008.
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Now complete your spreadsheet, Misc worksheet.

39. MISC- PRICE ANALYSIS
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What you can learn from a price chart:
resistance, current trend (up, down, sideways),
potential entry and exit points, high and low
(volatility).
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Here is what the worksheet should look like:
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40. QUIZ
1. What is a mutual fund?
2. Name 4 advantages of a mutual fund.
3. Name 2 disadvantages of a mutual fund.
4. Name 3 ways you can make money in a mutual fund
5. According to Dan, what are the 4 most important criteria in selecting a mutual fund to invest
in?
6. Name 3 things to look for when analyzing performance.
7. What time frame should you consider when looking at a track record?

41. QUIZ
7. What time frame should you consider when analyzing a track record?
8. What type of risk would a mutual fund with above average returns have?
9. Name 4 ways to measure risk.
10. Name 3 ways you can determine if a mutual fund is conservative or risky?
11. Name 3 other metrics you could use in selecting a mutual fund?
12. What can you learn from analyzing a price chart?

42. ANSWERS
Question 1. Slide 1
Questions 2 &3 Slide 2
Question 4. Slide 3
Question 5. Slide 8
Question 6. Slides 11 to 17
Question 7. Slide 11

43. ANSWERS
Question 8. Slide 27
Question 9. Slides 20, 21, 24
Question 10 slides 33, 34, 37
Question 11 slides 33, 34, 37
Question 12 slide 39, 40

44. EXERCISE
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There are thousands of mutual funds. How do you know which
mutual fund to invest in?
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There are many screening tools that many financial/investment
websites have.
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Morningstar has one. Here is the link.
http://www.morningstar.com/Cover/Funds.aspx
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The screens are in the middle of the page.

45. EXERCISE
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Now that you know how to analyze and select a mutual
fund, use the Morningstar fund screener to find a mutual
fund that meets your risk/reward criteria.