How to Find Value in No Load Mutual Fund Investing
by Ulli G. Niemann
Published on this site: May 4th, 2006 - See
more articles from this month
What are you thinking when it comes
to your no load mutual fund selections? Are you saving pennies
and sacrificing dollars?
Are you spending your time looking at expense ratios, analyzing
Morningstar ratings and searching for funds with low fees
and no 12b1 charges? If you are like most people, you know
these things in and out. You've spent hours evaluating them,
and your chosen mutual funds cost little to purchase and maintain.
But they still don't perform to your hopes and expectations.
So, why is this happening? Because this kind of investing
focuses on cost as opposed to value.
Investors with this philosophy have usually interviewed numerous
advisors. But instead of trying to find someone suitable with
a sensible approach, they only want to know who has the lowest
fees. That's like going to the cheapest auto repair shop and
getting the best price, but your car still doesn't run well.
Then there are the investors who call or email me wanting
a recommendation on a no load mutual fund. They want one with
no 12b1 charge, but they completely ignore the issue of how
the fund might perform.
Both these kinds of investors spend their time trying to save
pennies and in the process they are losing dollars. Instead
of falling into the penny wise, dollar foolish trap, here
are some ideas that will assist you in evaluating the end
profit rather than just the short term saving.
- Shift your focus from penny pinching to looking at the
big picture: What can a mutual fund or an advisor do for
you, not how much does it cost? Why? If you buy a given
no load mutual fund at the right time and it gains a tidy
15% for you over a 6 week period, would you really care
about the costs? If a mutual fund-or an advisor for that
matter-can give you superior performance and an increase
of several percentage points over your bargain price pick
wouldn't you pay an extra 0.25%?
- Consider finding a fee-based investment advisor who uses
a facts-based methodology and has a track record indicating
those kinds of returns. For example, in my own practice
I used a trend tracking approach to get my clients into
the market on April 29, 2003. Plus, our research and homework
led us to recommending funds that gained anywhere from 11.50%
to 22.00% over the following 6 week period. How did you
do during that time? Do you think any of my clients care
whether one of these funds has a small 12b 1 charge? Or whether they have the lowest expense
ratios in the industry? I know they don't.
The bottom line is to look at costs as balanced by performance
and that's where you find value. Then seek true value not
simple savings, enjoy healthy dollar-level returns and don't
sweat the pennies.
-Ulli G. Niemann.
Ulli Niemann is an investment advisor and has been
writing about objective, methodical approaches to investing
for over
10 years. He eluded the bear market of 2000 and has helped
countless people make better investment decisions. To find
out more about his approach and his free Newsletter, please
visit:
http://www.successful-investment.com
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