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Choosing a Mutual Fund Manager

Ken Benham, Librarian, Business Department,
two diverging paths with sunny blue skies on the horizon

A good mutual fund manager can be important to the success of your mutual fund investments which are often are large part of an individual investor’s assets.

Investors look at the past performance of a mutual fund manager as an indication of future performance. However, past performance, particularly in the short term, is not always a reliable evaluation method. The longer the period of performance measurement, the more reliable and accurate the performance prediction. Even the best managers may underperform in the short term. Investors who lack patience, jumping on the latest, hottest, funds will tend to make the basic mistake of buying high and selling low. As Warren Buffett says, a long term perspective is vital to maximizing returns and reducing investment costs. Volatility is common in the short term but outperformance is achieved in the long run. Avoid short term performance judgments and allow the manager sufficient time.

Patience before changing fund managers tends to be rewarded in the long term but the investor needs to be aware of red flags and when to consider a change of fund manager: patience but not complacency with fund management is the wise choice. Factors to be considered are loss of key management personnel, changes in fund ownership, and changes in investment processes and assets. Other factors include the management style: “value” investors, growth investors, or index investing.

Market Environment & Asset Allocation: we have seen internet and real estate bubbles burst with serious financial consequences to those heavily invested in these areas. Yet prudent managers who treated these areas with caution may have had lower returns prior to the market crash. Avoiding a short term, herd mentality is key to successful, long term financial success.

Your research in choosing mutual fund managers with a proven, long term, track record choosing mutual funds with investment strategies that match your personal goals, and persistence in sticking with those managers even through periods of underperformance, are proven ways to maximize your returns from mutual fund investments. [AAII Journal – The Truth about Top-Performing Mutual Fund Managers]


Further Reading


Databases and Electronic Resources

  • Morningstar Investment Research Center 
    Accessible from Central Library only. Morningstar Investment Research Center (MIRC) provides independent analysis and real-time data on over 14,500 stocks, 24,800 mutual funds, 1,500 exchange-traded funds and 700 closed end funds, plus analyst reports on over 3,500 securities. MIRC also provides screening tools, current articles and videos and financial educational resources.
  • Money Matter$: Know More, Make More Investing  - Mutual Funds & Etfs 
    You work for your money. Learn how to make your money work for you. The Los Angeles Public Library's Money Matter$ Guide offers library and online resources providing information, education, and tools covering savings, credit, investments, budgeting, financial planning, and consumer protection.

Periodicals

  • Money
  • Kiplinger’s Personal Finance
  • Forbes
  • Fortune
  • Barron’s
  • Wall Street Journal
  • Financial Times

…and more from the print collection and from our Research and Homework Databases.


 

 

 

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