Having made an
investment in a mutual fund, you should monitor it to
see whether its management and performance is in line
with stated objectives and also whether its performance
exceeds or lags your expectations. Unlike individual
stocks and bonds, mutual fund reviews are required less
frequently, once in a quarter should be sufficient.
A review of the fund’s performance should be
carried out with the objective of holding or selling
your investment in the mutual fund. You might need
to sell your investment in a mutual fund if any of
the events below apply –
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| You change
your investment plan. |
For example, as
you grow older you might adopt a more conservative investment
approach, pruning some of your riskier (equity-oriented)
funds. |
|
| A fund changes
its strategy. |
A fund that alters
its investment objective or approach might no longer
fit your strategy. |
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| The fund's
poor results persist. |
If a fund regularly
trails other funds that invest in similar securities,
consider replacing it. The poor performance is more
often than not a reflection on the relative expertise
of the asset management company. |
|
| Consider Fund
Costs |
The cost of investing
through a mutual fund is not insignificant and deserves
due consideration, especially when it comes to fixed
income funds. Management fees, annual expenses of the
fund and sales loads can take away a significant portion
of your returns. As a general rule, 1% towards management
fees and 0.6% towards other annual expenses should be
acceptable. Carefully examine the fee a fund charges
for getting in and out of the fund. |
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