The best funds will vary depending on your investment aims and ultimately the performance of the fund. The best funds for your personal circumstance are easier to find with the following tips:
Identify a fund sector in line with your investment aims and risk profile
There are many fund sectors to chose from. For example, there are Japan funds, property funds, technology funds and emerging markets funds. The overall sector of the fund can provide an indication of the risk involved. A corporate bond fund sector will usually feature less inherent risk than the emerging markets fund sector due to the volatility of the latter. However, with higher risks comes potentially higher rewards and the chances of losing more than you invested are amplified.
Identify a specific fund within your sector choice
So you’ve found a sector that has caught your eye, but now comes the task of selecting a specific fund for your investment. You may find a variety of funds that you like the sound of, but making a final choice can be difficult. Therefore the following tips should help you in your quest.
Locate the fact sheet (s) and analyse the information
The provider of the fund will usually have a fact sheet of the respective fund(s). If you do not see it on their website, simply Google it or search for the fund on Trustnet. The fund fact sheet will provide you with details on the fund manager, his latest commentary, charted performance of the fund as well as an overview of the key holdings or rather companies the fund invests in.
A fund manager with a good track record within the sector obviously inspires confidence. Similarly a good performance of the fund will also raise hopes. However, past performances are no guarantee of future returns.
Conduct proactive research
Proactive research on the funds are useful for those who want to fully understand what they are investing in. Look at the key holdings of the companies held within the fund, and ask yourself do you believe in them too? Read their latest financial results and see if you agree with the fund manager’s prospects. Similarly, look for the fund manager’s latest comments, does he provide a balanced view of performance and inspire confidence?
Ignore marketing literature
Fund supermarkets usually are not allowed to provide advice unless it is asked for. But what they are allowed to do is inform you of new funds as and when they launch. Some fund supermarkets strongly bombard customers with marketing literature related to funds, but one must not base their decisions on their literature. It is important to do your own research as the fund supermarket analysts to do get it wrong, and they will not be held accountable for your investment unless proven otherwise.
Investoo currently produces its own unbiased list of the latest fund launches which is regularly updated as and when a new fund is launched.
Track the performance of the fund
On-line technology should allow you to track the performance of the fund. Regularly view the performance of your fund and look for any danger signs. However, always remember that funds should be treated as long term investments.
Apply these steps no matter how you invest in funds
Whether you invest in funds through a fund supermarket, via an IFA or via a bank, you should apply the above tips. After all, the outcome is the same as your money will be reaching a fund manager. Conducting your own research will allow you to have total piece of mind on finding the best fund for you. Plus advances in the internet make fund research easier than ever before.