Truths about the Public Mutual Fund
We place a lot of focus on the best mutual fund in our investment blog with good reason; when selected carefully, low risk mutual funds can help achieve the goals of the tactical asset allocation models for your portfolio. Various asset management strategies utilize low risk mutual funds, particularly private wealth management funds, to meet the investment management solutions for our clients.
What is Investment Management?
Answering “What is Investment Management?” is simple. Investment management is utilizing tactical asset allocation to create a portfolio that meets your investment objectives. Using carefully researched low risk mutual funds along with other investments, we find asset management strategies can, in fact, help achieve your financial goals. Part of our capital investment management strategy is finding the best mutual fund with a performance history to meet your objectives.
Choosing the best mutual fund isn’t as easy as searching the internet for low volatility mutual funds with great returns. Considering the sheer number of ads by investment management companies and brokers, you could literally find hundreds of public mutual funds that could meet any particular criterion. An ad with enticing figures is not necessarily the best mutual fund for your investment goals.
The Hard Facts of Any Public Mutual Fund
As we’ve said before, the odds are that if you have a public mutual fund, 75% of time you won’t beat stock market indexes, such as the S&P 500, even if they are a public mutual fund meant to mirror the index. An investment management company can have fund management who isn’t very good at picking stocks for the fund. Some fund managers have a decent track record for picking stocks, but the fund’s performance isn’t enough to cover the fees the fund incurs. Unfortunately, shareholders’ returns are reduced by the expenses and fees charged by the fund.
There are three other drawbacks that are inherently found in a public mutual fund.
- While expenses and fees are part of investing, no one wants to pay more than they have to. Many of these fees are either buried in the fine print or aren’t adequately disclosed to clients until they see their dismal returns.
- The investment management company has a fund manager who picks the stocks for the mutual fund. You are stuck with their choice. Unfortunately, you may be better at choosing individual stocks than they are.
- Once a fund gets reaches a certain size, there are limits as to how great the performance can be. Once a fund manager purchases all the great stocks, what’s left? What’s left is stocks that don’t perform as well, which can affect the overall performance of the fund.
Are Private Wealth Management Funds Better than a Public Mutual Fund?
The best mutual fund for your portfolio is generally one of the low risk mutual funds that meets your tactical asset allocation goals, consistently keeps pace with, or beats the markets and has relatively low fees; depending on their ability to consistently beat the indexes. Both index and private wealth management funds meet these goals. Index funds are generally designed to keep pace with a specific index, such as the S&P, and have lower expenses because there is no need for extra staff to help select investments if they are just attempting to mirror the tactical asset allocation in the index. They generally have less tax reporting consequences since the stocks within the fund don’t change as often.
While index funds are a good choice, many of the private wealth management funds can tend to perform better even though they tend to not be tax efficient. Private wealth management funds can give you the benefits of low drawdowns and can be truly low risk mutual funds. Unlike index funds, when the markets start to tank, most private wealth management funds can to 100% cash to avoid significant losses. No other low risk mutual funds offer this type of security. Additionally, private wealth management funds are a good choice for those using a tactical allocation strategy for investing.
Public mutual funds are definitely one of the top investment management solutions available. Low risk mutual funds, specifically some of the private wealth management funds, can provide the benefit of growth during a market surge and the safety of a conversion to cash when the markets drop.
If you have an interest in getting an expert evaluate your mutual funds to show you the risks you have and compare them to some other possibilities that may work well with your investment strategies, contact us and we can show you a few pretty interesting things; like funds that did not lose money in 2008.