Tips For Comparing Fund Performance
Monday 14 May 2007
Past returns are no guide to future performance. While you should never make an investment decision solely on the basis of past returns, examination of a fund’s past performance can help you understand the characteristics of the investment option, and sometimes the asset class itself.
Ensure the returns you are comparing have a common end date. Different end dates can produce very different underlying investment conditions, and generally the figures are not at all comparable.
Look for common time periods, such as the past five and ten year. Be careful not to confuse one and two year numbers appearing in different tables.
Focus on longer-term results – a minimum of five to ten years is usually advisable.
Make sure the funds have broadly similar exposures to growth assets – that you are comparing funds which invest generally in the same kinds of assets. Identify any big differences in the mixture of growth and income assets between the funds.
Check returns have been adjusted in a common fashion for tax and ongoing charges. Some funds will quote returns after investment and administration fees, while others quote returns after investment fees, but before administration fees, which are deducted from a member’s account separately.
Keep in mind that the return shown in your account statement may not match the return shown in the fund’s annual report or product disclosure statement, because of the impact of cash flows, and whether or not the two performance calculations take account of other charges, such as entry or exit fees.
Most importantly, get professional investment advice before making any decision, especially any decision involving switching funds!
Categories: Asset Class Management,
posted by Murray Round Wealth Management @ 19:23,
The Authors
Nicholas Round
Nic is the Managing Director of Murray Round Wealth Management Limited, who seeks to ensure the advice provided is truly independent. Based in Shropshire with clients local, national and worldwide, Nic has strived to find the best possible service for his clients needs, by researching and studying the market, trends and philosophies. Nic strongly believes Asset Class Management will bring his clients Financial Freedom, Independence and Happiness.
Kirsty
Kirsty is our communication guru. Managing information requires considerable due diligence and her passion for organisation gives the clarity we all seek. From Shropshire, with a Psychology Degree and much travelling, she is now back in Shrewsbury...and London often, keeping us all at Murray Round focused.
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