Performance information adds to your knowledge about an investment gained from reading the investment's prospectus. The most common ways to get specific investment performance information are:
Keep in mind...
Contact the investment company directly.
Utilize free online mutual fund and other investment rating services. A web search for "investment ratings" will bring up dozens of independent, consumer-oriented mutual fund rating services. Morningstar (www.morningstar.com), Standard & Poor (www.ratings.standardpoor.com), Value Line (www.valueline.com), Mutual Fund Investor's Center (www.mfea.com), and Smart Money (www.smartmoney.com) are some of the most popular sources for independent, unbiased ratings and comparisons; they have solid reputations, but they're by no means the only reliable services.
Utilize your favorite web browser or search engine. All have quick access to mutual fund information. Please refer to your particular browser/search engine for details.
Keep in mind...
Most rating services charge for certain types of performance information.
Performance information received from mutual fund companies is generally free.
Investing is a risk-return dichotomy. Mutual fund money market investments are considered very safe, and offer a relatively low, predictable rate of return, although that return, like any, cannot be guaranteed. At the other end of the risk-return dichotomy are mutual funds that can be extremely violate, offering investors the possibility of dramatic gains (and losses). Mutual fund investments can lose value in a volatile market -- just as they can gain value.
Shares of mutual funds, including money market funds offered by fund companies, are not deposits of or guaranteed or endorsed by any financial institution; they are not insured by the Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board, or any other agency, and they involve risk, including the possible loss of the principal amount invested.
In general, the more volatile an investment (i.e., the less predictable its rate of return), the more POTENTIALLY lucrative its earnings. More volatile investments are considered to be more risky investments.
The investment return and principal value of an investment will fluctuate. An investor's shares, when redeemed, may be worth more or less than when purchased.
According to the Investment Company Institute, the mutual fund industry's trade association, for the twelve months from July 30, 1999 to July 30, 2000, approximately 42% of assets in the average stock mutual fund were bought or sold, meaning only a bit more than half the money in the fund actually stayed put for that period. That is up from approximately 40% turnover for the 12 months prior. Some retirement plan experts believe some of this fast trading is occurring in 401k plans.
With 401k Solution you can discourage frequent trading by limiting your 401k investment selection to a single family of no-load mutual funds.
According to most academic studies, frequent trading of mutual funds to squeeze out a few percentage points of gain a bad idea. Studies confirm what has been suspected by professional money managers for years - namely, frequent mutual fund trading usually hurts long-term returns.
As reported in the Wall Street Journal (9/22/00, Lucchetti, Aaron, "Frequent Trading Worries Fund Firms"), a recent study by University of California, Davis assistant professor Terrance Odean and professor Brad Barber found that investors who traded mutual funds most frequently had the worst returns for a five-and-a-half year period ending December 1996.
During that period the average household earned an annualized return of approximately 15.3% from their mutual fund investments. Frequent mutual fund traders earned an average annualized return of only 10% for the same period.
With 401k Solution you can discourage frequent trading by limiting your 401k investment selection to a single family of no-load mutual funds.
By offering a single family of no-load mutual funds PLUS self-directed brokerage accounts, which is also an option with 401k Solution, you leave the door open for more sophisticated investors to choose self-directed brokerage accounts and thus trade stocks, bonds and mutual funds whenever they see fit while steering less sophisticated investors to the less intimidating, less complicated world of a single family of quality no-load mutual funds.
All "load" and "no load" mutual fund investments, whether accessed via self-directed brokerage accounts or more traditional channels, charge investors annual management fees to cover the operating expenses such expenses as auditing, record keeping, administration, mailing of statements, advertising, providing telephone support, investment managers salaries, commissions to brokers, etc. Typically these management fees, which are automatically deducted from each investors account, range from a low of 1/2 percent to a high of 2 percent annually.
Information concerning a fund's management fees is always available by contacting the fund company or referring to the fund's investment prospectus.
Some investors have the misconception that management fees are set and regulated by the federal government, and that one company's fees are like another's. In fact, management fees are set independently by each mutual fund or other investment company. The impact of derivations in fees can be quite significant over time and should therefore be considered carefully.
For example, assume a 10 percent return on an initial investment of $25,000. A mutual fund with an annual management fee of 1.3 percent will yield $31,700 LESS over 20 years than a mutual fund with a management fee of just 0.2 percent, all other things being equal. That's a lot of foregone retirement savings!
Information concerning a fund's management fees is always available by contacting the fund company or referring to the fund's investment prospectus.