Friday, December 15, 2006

Chasing Returns on Mutual Funds

Recently I was on a message board where someone said they followed the sound mind investing principals. Well sound mind investing does fund upgrading following the principals of the bible. What those are I have no idea. BUT I did however find a website that also does fund upgrading but just based on the climate of the market. The website No Load Fund X is run by Janet Brown of DAL management services.

What is the strategy? The strategy is investing in mutual funds based on their previous returns and expectations in comparison to the field they are in. Thus only the top mutual funds in each category are suggested as investment. These mutual funds are to be held until they fail to outperform the market and fellow competitor mutual funds.

Thus monthly, you pay money to either SMI or NLFX ($9 or something), and they make suggestions of top mutual funds you should be holding for the highest rate of return. Of course there are a few caveats, one of which is if you constantly trade mutual funds you may be paying early redemption fees. Also the mutual funds they suggest could have very high annual maintenance fees. Thus it's possible any gains could be easily eaten up when put against the index.

I personally am tempted to try this strategy and see what happens. I suppose this is why I am writing about it. I'm not sure if it would really be the most efficient or highest returns, but people who pay for the advice really believe in it.

I am hoping for feedback from people who have used this methodology for investing in MF, thanks...


mOOm said...

Hopefully the returns they are talking about are after annual expenses (you'd have to add back the expenses to get a pre-expense return as pre-expense returns are never reported). I would either try to get a track record from them - past picks and check it out (and if they won't give it that is suspicious in itself) or otherwise try it for a while but don't make any real trades until you are convinced. In a taxable account lots of trades result in short-term CGT which isn't a good idea too.

Living Almost Large said...

You know I'm not sure. People use it in taxable accounts because it's near impossible to do in a retirement account, unless it's a IRA. But that's usually not a large enough portfolio to do this return chasing.

I agree the CGT could take a huge hit of the returns, but it's not published data what the real returns are after the tax hit. But there are many testimonials on each website about the briallance of the investing strategy.