Past total returns and star ratings based on them cannot predict future performance. But this new rating system uses past daily returns and their riskiness to measure how well a fund is being managed. Well managed funds continue to do so for a while, and they beat the market in the near future while taking lower risk. Poorly managed funds do the opposite. Recent research has proven the benefits of using this rating system.
You can also get a periodically updated list of the best, well managed mutual funds suitable for individual investors, through the link for “Get Best Funds List.” Details of the risk-reward rating system are available at www.FundReveal.com It provides detailed analysis of mutual funds for individual investors. It also provides an advanced analysis tool for advisors along with a screener to search for funds based on chosen risk-return criteria over multiple time periods.
How to interpret the results for your funds?
•(A-Best) -- Well managed funds have higher average daily returns and lower risk of loss than the market represented by the S&P 500. They help your money grow while reducing risk of loss.
•(D-Worst) -- Poorly managed funds have higher risk of loss, but produce lower average daily returns. Avoid them if you can!
•(B-Risky) -- Funds with this rating produce high daily returns but at higher risk of loss. Many (A-Best) funds produce similar daily returns without taking higher risk of loss.
•(C-Less Risky) -- Funds with this rating have lower average daily returns, but also have lower risk of loss. They can be safe against market crashes.
Monitor your funds regularly:
It is important to know how your fund is being managed. It gives you an idea of how it might behave in the near future. Higher daily returns and lower risk than S&P 500 are good. Lower daily returns and higher risk are bad.
But the quality of fund management -- investment decision making capability can change over time as the fund manager’s ideas change, or the market or economy changes. Looking at the risk-return ratings monthly, tells you if your fund’s management quality is on track. If you feel that the fund is taking too much risk compared to S&P 500, or is producing worse daily returns, you have the option to get rid of the fund and look for some better fund. If you like its risk-return behavior, you have the option to hold on to it. But don’t make frequent changes; once a quarter or a year is generally sufficient.
Be a smart investor:
We -- you, us and others are about 50 million people in the U.S. who have invested more than $11 trillion in 20,000+ mutual funds. The number keeps growing each year! But sadly, many mutual fund investors lose money each year. When performance is good, fund managers take credit. When it is bad, they blame the market.
Conventional past total returns and star ratings fool investors in chasing funds that have done well in the past. But past total returns cannot predict future performance. Smart investors know this.
As a smart investor, you will invest in well managed funds and get rid of poorly managed funds. A fund manager makes daily decisions to buy and sell stocks and bonds held in the fund. The average daily return of a fund, and its variability relative to the market, tell us how well the fund is being managed.
We are not brokers, advisors or fund company representatives. We only provide objective, fact based analysis for investors.
Not liable for errors and omissions. Not responsible for losses or gains incurred through use of ratings and risk-return analysis provided by this application. We do not hold any certifications for licenses to sell securities or provide advice or execute trades on behalf of users. Not an advice or recommendation.
C Investment Risk Management Systems Inc.