How To Fix Poor Mutual Fund Returns
Getting a high mutual fund return might seem like an oxymoron to some people. This is because most actively managed funds have pretty poor performance. It's not an accident. Government regulations have spurred an industry that has become increasingly inefficient, and as a result, has shown investors little more than inflation-matching returns.
While you may find some ways to boost your fund's returns, keep in mind that these products will almost certainly not be the end all, be all that you're told they are.
You can boost the returns on your mutual funds by not paying attention to historical returns that are posted by the fund company. These are, many times, inflated. By using simple averages instead of compound averages and effective yields, the fund can show you returns that are higher than the actual returns posted by the fund.
A financial calculator can help you figure out the compounded return of an investment but, unless you know how to do that, you're probably going to have a hard time trying to figure out what return you are actually getting.
The second step in increasing your mutual fund's return may be just to sell the fund. I know that's not really boosting the return of the fund, but you may be better off investing in something else. Actually, that's one of the basic rules of investing: understand what you are investing in. Unless you understand every business that that mutual fund holds, you are asking for trouble. You're not being a smart investor, you're just guessing.
The last "tip" on boosting your mutual fund returns is to choose mutual funds that invest in smaller capitalization companies or choose funds that are relatively small in size. A smaller mutual fund would probably be the essential point here. Small funds have more places that they can invest in. It's also easier for a $10 million fund to double in size than it is for a $100 million.
While you may find some ways to boost your fund's returns, keep in mind that these products will almost certainly not be the end all, be all that you're told they are.
You can boost the returns on your mutual funds by not paying attention to historical returns that are posted by the fund company. These are, many times, inflated. By using simple averages instead of compound averages and effective yields, the fund can show you returns that are higher than the actual returns posted by the fund.
A financial calculator can help you figure out the compounded return of an investment but, unless you know how to do that, you're probably going to have a hard time trying to figure out what return you are actually getting.
The second step in increasing your mutual fund's return may be just to sell the fund. I know that's not really boosting the return of the fund, but you may be better off investing in something else. Actually, that's one of the basic rules of investing: understand what you are investing in. Unless you understand every business that that mutual fund holds, you are asking for trouble. You're not being a smart investor, you're just guessing.
The last "tip" on boosting your mutual fund returns is to choose mutual funds that invest in smaller capitalization companies or choose funds that are relatively small in size. A smaller mutual fund would probably be the essential point here. Small funds have more places that they can invest in. It's also easier for a $10 million fund to double in size than it is for a $100 million.
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