This week’s AAII Weekly Digest highlights these “must-read” AAII articles:
Mutual funds, as well as exchange-traded funds (ETFs), hold several advantages over buying and managing an individual stock portfolio. As we all know, diversification is key to lowering your risk while maintaining an expected return. However, the universe of funds is actually much more expansive than that of stocks. In fact, there are over 16,000 mutual funds, closed-end funds and ETFs from which to choose. Fund screeners are an excellent way to winnow down the investable universe of funds to a select few that match your personal criteria. In this article, the editors of Computerized Investing offer up their favorite fund screeners for individual investors.
How simple or intricate you make your mutual fund portfolio comes down to your investor profile: the amount of time and interest you want to spend managing it, your investment knowledge and the total amount of dollars you’ll be investing. Using the three-tiered mutual fund portfolio guideline, you can create any mutual fund portfolio you want that comfortably matches your investor profile in terms of complexity, yet still remain properly diversified.
One of the advantages of mutual fund investing is the wealth of information that mutual funds provide to fund investors and prospective investors. Taken together, the various reports provide investors with vital information concerning financial matters and how the fund is managed—both key elements in the selection process. In fact, mutual fund prospectuses, annual reports and performance statistics are key sources of information most investors will need in the selection and monitoring process. However, to new mutual fund investors, the information may seem overwhelming. This AAII Investor Classroom will help show you what to look for when reading a mutual fund statement, as well as where to look for specific information.
Investors can take advantage of an observed characteristic that predicts higher fund performance. As long as the fund keeps its strategy unaltered, and as long as the observed characteristic predicts good performance, investors will benefit by investing in the fund. This article discusses the research of Yakov Amihud and Ruslan Goyenko, who examined all actively managed stock mutual funds that invest at least 75% of their holdings in stocks. They discovered that many funds are “closet indexers,” but they also identified factors that investors may use to identify fund overperformance moving forward.
Our Member Question for this week is:
Who has advised you on choosing mutual funds or exchange-traded funds (ETFs) to invest in?
Vote to answer this week’s Special Question:
What are your primary resources for researching mutual funds
and exchange-traded funds (ETFs)?
Last Week’s Results:
How significant of an impact do you think President Trump’s executive order restricting travel to the U.S. will have on U.S. multinational corporations?
In the face of the impact that executive orders from President Trump, especially the temporary travel ban, are having on certain industries, we asked our readers how much of an impact they feel the orders will have on U.S. multinational corporations. In addition, we asked how our readers believe the global economy will change due to the Trump presidency.
Selecting a mutual fund, while less time-consuming than investing in individual securities, does require some homework. No one should put money into an investment that is not understood. This does not require a detailed investigation of the fund’s investments, but it does require an understanding of the fund’s investment objective, strategy, risks and performance history. The latest update to AAII’s Individual Investor’s Guide to the Top Mutual Funds covers nearly 1,600 funds and lists the total return performance of common index benchmarks, summarizes average performance and risk of the fund categories used in this guide, allows you to compare the performance of the 50 most widely held funds, lists the 50 best- and worst-performing funds of 2016 and much more.