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Your Questions About Mutual Funds Ratings


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Your Questions About Mutual Funds Ratings

  1. 1. Your Questions About Mutual Funds RatingsMaria asks…please give the sites where I can find ratings related to MUTUALFUNDS?Steve Winston answers:THE BEST site I know of is http://themutualfundstore.comAND Mr. Adam Bold has a nationally syndicated, call-in radio program.Thanks for asking your Q! I enjoyed answering it!VTY,Ron BerueYes, that is my real last name! 1/8
  2. 2. Paul asks…How seriously should we take ratings of mutual funds given byvarious websites?While planning for investment in mutual funds, I often look what return and risk category thefund falls into as stated by various websites. I also see what "star" category the fund falls into. Isthis method correct? Do all the websites evaluate funds in the same way?In some cases I find many funds are of five star category but some are rated as superior/eliteetc and others are not rated at all. Why is it so? Also, when I find any fund I have invested, getspoorer category class, is it time to stop investing in that fund and switch over to some betterone? Or should I wait to see its performance for a little while? after all behavior of equity fundsare to be judged over long time interval.Steve Winston answers:I also used star rating of icicidirect and money control as ref. For investment.I also checked their top holdings.I checked their past performance for more than five years in SIP and also in point to pointinvestment.I also checked fund managers profile. Fund house is also important.I believe in investing through SIP only with more than five years investment horizon.There are some other methods to evaluate funds but that is beyond my scope of knowledge 2/8
  3. 3. presently.Jenny asks…How to Pick Mutual Funds on MorningStar?Someone recommended MorningStar site as a place to check for best-rated funds, but it seemslike I have to subscribe to their site to be able to view that information. Is that correct or am Imjust missing it somehow. How do you go about picking your funds? Are there any good onlinesites that you rely upon? I saw one called wikiwealth, but what confuses me is that differentsites have different opinions / ratings on the same fund. Thanks!Steve Winston answers:Look at the returns, how the fund performed compared to its index, expense ratio, the starrating, etc.Each site has their own analyst & rating criteria. So its not likely they will agree. There are manysites where you can get mutual fund ratings: MSN, Yahoo, CnnMoney, as well as morningstar. 3/8
  4. 4. I am a morningstar premium member, so I get access to all their fund information. Agreed, theydont give out as much FREE INFO as they used to. But you can also get some pretty goodanalysis from the other sites. Just might take a little more digging.Mark asks…Mutual Funds and dividend yield?When reading ratings of stock mutual funds in Forbes or Kiplingers magazine, why is it acolum is never entered for certain funds for dividend yield?The mutual fund types in particular Im asking about are say equity income, balanced fundswhere a good portion is put into bonds and say a sector fund of large bank stocks. Especiallynow in the bank area where they have tumbled. If a bank still pays same dividend and the pricehas gone south a lot, the dividend yield would rise a great deal. So , why do these magazinesnot have a of dividend yield for Certain funds?Steve Winston answers:For mutual funds, the thing you need to look at is Total Return, not "dividend yield." Mutual 4/8
  5. 5. funds make periodic dividend/capital gains distributions, but it does not work like individualstocks or bonds.Susan asks…Is there an ETF or mutual fund based on Morningstars starratings?Morningstar also maintains a star rating of individual stocks.Steve Winston answers:There are at least eight ETFs based on Morningstar ratings. These includeJKI,JKL,JKJ,JKF,JKD,JKG,JKK and JKE. Each is based on a different segment of the market,such as small cap, growth, etc. Just type in the symbol in yahoo finance, and then click profile tosee what the ETF tracks. 5/8
  6. 6. Betty asks…Mutual funds and Morningstar?I am trying to figure out how Morningstar rates mutual funds (STARS). I have been looking forsomething- expense ratio, past performance, experience of manager, and I am lost. Doesanyone know what they are rating the funds on? Are they getting paid for good ratings?I appreciate your answers!Steve Winston answers:From their webiste: "Morningstar rates mutual funds from one to five stars based on how welltheyve performed (after adjusting for risk and accounting for all sales charges) in comparisonwith similar funds."But Ive never found anything that actually details their formula. Probably they keep it internal,and probably even tweak it from time to time. I doubt they are getting paid for ratings, because ifthey were and word ever got out, they would go bust the next day and be on the receiving endof a lot of lawsuits.One thing to remember is that their ratings are partly based on recent (past) performance. Mostmutual funds have good periods where they outperform the markets, and bad periods where 6/8
  7. 7. they underperform it. But if they all end up relatively average in the end, sometimes they get ahigh star rating from a recent good period, and then go into a bad period. In the long run theywere average, and you just happened to get in at the wrong time because theyve looked sogood recently.George asks…When looking at diversification of a mutual fund portfolio, howmany mutual funds should I be buying into?I am 24 years old and looking at my future investments in my Roth IRA. Right now I own sharesof 3 separate mutual funds, divided equally by initial monetary investment. Ratings below arefrom Morningstar.-FDFFX: Fidelity Independence, a 3-star rated Large Growth Fund.-FICDX: Fidelity Canada, a 5-star rated Foreign Large Blend Fund.-HIINX: Harbor International, a 4-star rated Foreign Large Value Fund.With the upcoming year for contributions of up to $5k, I am looking at the potential of eitherbuying into 2 new funds (typically most funds I look at have a $2500 buy in), 1 new fund andadding to my already existing funds, or not buying into any new funds and purchasing onlymore shares in my already existing funds (which are a bargain with the market the way it is).I feel as though buying into 2 more funds is the best bet for this year, but at what point will Ihave enough diversification to start reinvesting in already existing good performing fundsversus continually making minimum purchases into new funds?About me: At 24 years old I am not worried about risk. I prefer extreme risk with the possibility ofextreme gains. Because of this I am looking into this year buying into some Small Cap Value 7/8
  8. 8. funds, especially in foreign markets. Right now Im running a 68% foreign / 26% domestic / 4% short-term. I am not specifically looking for a fund recommendation as much as I am overall investing strategy for the upcoming 3-years with suggestions of fund TYPES that I should be buying into. Also I wish to know when should I stop buying MORE mutual funds and start reinvesting into already held high performing funds..if ever. Thanks! Note: I would like to treat my IRA as if it were in a vacuum. I will be investing into a 457b and a 401a plan this year, but I will be using the same investment strategy as in my IRA (but purchasing different mutual funds of the same types for stability and diversification). By vacuum, I mean that I dont want my 457 or 401 to be considered when looking at diversification...I want each portfolio to be separately diversified. Which Im actually starting to think might not be my best option. By actually using my 457 and 401 to purchase funds that compliment my existing IRA picks, I could get the amount and types of funds I want quicker. Steve Winston answers: For diversification, putting it into five or so funds that invest in different types of stocks is best. You shouldnt put it all into an S&P500 fund, because that fund only represents 500 of the biggest companies in the United States -- it doesnt cover small-cap stocks or foreign stocks, for example. You should probably have a large-cap fund, small-cap fund, foreign-stock fund and maybe a value fund and a growth fund. If you buy to many funds, you are likely to have overlapping investments and would be less diversified. Powered by Yahoo! Answers Read More… 8/8Powered by TCPDF (