Mutual Fund Frequently Asked Questions - FAQ

Investor Economic and Financial Education

What factors should investors consider in determining the long-term profitability of a mutual fund? Selecting the best mutual fund to add to your portfolio requires analysis of the funds structural characteristics: the size and age of the fund; its cash position; portfolio concentration; and market capitalization.

What to Look For When Researching Mutual Funds:

Size and Age
In selecting a mutual fund, its important to evaluate how the fund has performed over longer periods, and how it has weathered the ups and downs of the market. Ideally, the best mutual fund selections include those that have withstood the test of time, and have continued to be profitable despite its size. With more established funds, investors and analysts can review how the fund managers and strategy of the fund performed in a variety of market conditions. Combined with other analytical tools, this can be useful in determining the appropriateness of a mutual fund.

Cash Position
Its also important to determine the funds cash reserves. If a fund rapidly develops a huge cash reserve, it could be a sign that the fund manager is unable to control the money coming in, and thus, the fund is not maximizing its investment opportunities.

Portfolio Concentration
Among the fundamental basis for investing in a mutual fund is reaping the benefits of a diversified portfolio. However, studies have shown that the sometimes best performing mutual funds are those that exhibit more industry or style concentration.

Market Capitalization
Understanding a funds market capitalization can also be a good indication of a funds investment emphasis, as well as the risks that it assumes. Market capitalization is computed by multiplying the number of outstanding shares by their current market price.

Please Note: As with any investment, its important to remember that a funds past performance is no guarantee of its future success.

We Can Help You Evaluate and Select Mutual Funds

Step 1: Contact us and provide us with information about your financial situation or copies of your statements

Step 2: Complete a Financial Plan Questionnaire

Step 3: One of Atlantic Financial's Financial Advisors will contact you with detailed recommendations about your portfolio.

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