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| hances may be that you are like many of us whose 401(k) statements are beginning to pile up unopened on the kitchen counter. Perhaps for good reason. After all, the experts have always suggested that if you were to continue doing exactly what you have been doing until now, (being a long-term investor, and having funds withdrawn from your paycheck), and you wait to review your statement only once this mess is over, it’s likely you may have recovered from your short-term losses. All this regardless of the fi nancial mess that surrounds us. Sounds great, right? Well, not so fast. When you fi nally decide to open your envelopes, the amount on the bottom line of your statements will depend on how much of your 401(k) mutual funds were invested in the companies, industries and sectors that were directly affected by the economic tsunami of recent weeks. Hopefully, you don’t own any of the stocks that have made big news. Anyway, what is the point in making yourself sick over a temporary declining balance in an account that you are not going to use for many years? While those who bought shares of Lehman Brothers, invested in Fannie Mae, Freddie Mac, and Merrill Lynch, among others, are scrambling to make the necessary adjustments to their portfolios to protect their assets, there are many other funds that are managing to outperform the stock market, even during these hard times. How do you fi nd who they are? We will use one of the best free tools available on the Internet to fi nd reliable information on mutual funds, stocks and Exchange Traded Funds: Morningstar. Go to the main screen at www.morningstar.com. Click on the Funds tab and go to the Fund Screener link that you fi nd under the Tools category on the left-hand side of the screen. Next, go to the Returns section and choose the S&P500 index tab in the drop-down window. That index represents the stock market in the United States since it contains 500 of the largest and most infl uential companies in our country. Now choose any one of the timelines, between Year-To-Date and 10 years, to fi nd the mutual funds that have generated returns higher than the market during that specifi c period. Click on the Show Results tab at the bottom of the screen. You will then see an alphabetical list of the mutual funds that meet the criteria you have specifi ed. Choose Performance in the dropdown window. Now you will be presented with funds that lead the pack, amongst those that surpassed the return of the market since January 1 of this year. When I visited at the end of September of 2008, I clicked on the YTD heading to sort all the results from largest to smallest returns. Your results will be different. If you wish to compare different periods, simply click on the different headings. The best candidates should show stability among the different period options. After all, would you want a fund with a stellar performance for one year only to fall apart over a longer period of time? Once you have made a note of a few of the leaders, click on their symbol to dig deeper into their credentials. The most important factors to consider when evaluating a mutual fund are: their average return over a three-year period, their risk (measured by the fund’s Beta rating) and the fees that they charge. Remember that there are four places where a mutual fund can list its fees: front, back, 12b(1) and expense ratio. Add all these charges and subtract them from the returns to arrive at the net rate of return. When the market is smiling at us and everybody is making money in stocks and mutual funds, it’s very easy to fund a winning fund. But bad times in the market offer a great opportunity to fi nd out which funds tend to hold their value better than the rest. |
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latin forum Ask Julie Fine-Tune your chances may be that you are like
many of us whose 401(k) statements
are beginning to pile up
unopened on the kitchen counter.
Perhaps for good reason. After all, the experts
The above guidance is elaborated on in
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