horses

 

Race Horses and Mutual Funds
By: Al Thomas

For years investors have been taught to look

into the composition of a mutual funds. In other

words the experts want you to take the time to

analyze the stocks within the mutual fund

portfolio categorize them by industry group and

try to understand the objective of the fund

manager. This is nonsense.

When I go the track I look to see what the horse

has been doing for the last several races. I

dont give a hoot what he had for breakfast. All

I want to know is has he been fast Is there a

good chance he will finish in the money in the

next race I only want to know how he has been

performing.

Most mutual fund managers except those who

follow index funds are always trading. You have

no idea that what is in the portfolio today was

there yesterday or will be tomorrow. Some fund

managers trade more than others but you can

prove this to yourself by looking at the fund

prospectus at the beginning of the year and one

of the updates that funds publish quarterly.

Many of the stocks will still be there however

you dont know if the percentage holdings are

the same.

By the way dont bother reading a mutual fund

prospectus. They are worthless when it comes to

making money. Consider that most of the

information in it is about a year old by the

time you read it. Think about this seriously for

a minute. Is there anything you can find out in

the document that will show up in your bottom

line Ill wait while you think. OK There

really wasnt anything was there All

prospectuses are basically worthless.

But you say the SEC (Securities and Exchange

Commission) in Washington approved this. No

they did NOT. They dont approve of anything;

they just read it to be sure it meets the

regulatory requirements for disclosure. There is

almost no difference between the prospectus for

the worst mutual fund and

the best mutual fund

and both of them may have been read by the same

Dilbert in his cubicle at the SEC.

There is one excellent way to find out which

fund to buy. It is based on performance. How

much has the fund increased in price during the

past 12 months Just 12 months. Many financial

analysts want you to look at 3year 5year and

10year performance. Remember that horse I

dont care how many races he won 3 or 5 years

ago. Can he run NOW There are many publications

and web sites that tell you the best performers.

Investors Business Daily prints a list of best

performing funds each day. You might have to see

the paper every day as they sometimes just tell

about the longterm performance. You want the

last 12 months and the last 3 months.

Three years ago you could have bought the best

performing fund on the street and today have a

dog. I call a dog any mutual fund that is not

outperforming the S&P500 index.

If you were a jockey you would want to ride the

fastest horses because in many races you get a

percentage of the purse. The same applies to

mutual funds. You must own only the best

performing funds at all times. Like the jockey

you must pick the fastest horse if you want to

be a winner.

You should review your fund holdings monthly to

see that you are only in the best funds. It

might take you an hour but you will find that

you will double the current return on your

mutual fund investments. Do it!

Al Thomas book If It Doesnt Go Up Dont Buy It!

has helped thousands of people make money

and keep their profits with his simple 2step method.

Read the first chapter at http://www.mutualfundmagic.com

and discover why hes the man that Wall Street does

not want you to know.




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