Performance information and fund objectives are key to investors who want to compare mutual funds
Although younger investors are very involved in buying mutual funds, the overall investment in mutual funds dropped in 2012, according to a Spectrem’s Millionaire Corner study.
Sixty-two percent of Millionaire investors reported investment in mutual funds, down from the high of 68 percent in 2008, according to the study. However, interest among investors 44 years of age and younger remained high, especially among U.S. Stock Mutual Funds, at 77 percent to just 59 percent among investors 55-to-64 years of age.
The study surveyed investors with between $1 million and $5 million net worth not including primary residence.
The youngest segment of investors was also far more involved with municipal bond mutual funds, with 46 percent invested to just 27 percent of investors ages 55-to-64.
Interest in the international and foreign mutual fund market was down to 31 percent from 42 percent in 2008.
When investors ask advisors to compare mutual funds, they can ask about the fund’s objectives, its focus (technology, insurance, environment, etc.), past performance, purchase price and fees. Past performance will almost always be a factor and can be the only factor more often than any other criteria.
But most investors will need information from a third party in order to compare mutual funds. They can do so on-line with rating services like Morningstar, but even Morningstar warns against using past performance as the only way to compare mutual funds.
Relative performance is another key factor. If an investor is looking for a particular type of mutual fund (U.S. stock, municipal bond) than using relative performance over a long period of time is considered the best way to compare.
Exchange Traded Funds (ETFs) are yet another product to investigate when asked to compare mutual funds. According to a Spectrem’s Millionaire Corner study on ETFs, although only 28 percent of Millionaires own ETFs, ownership among all wealth segments rose from 16 percent in 2008 to 28 percent in 2013.
The study showed that Millionaires consider mutual fund companies to be the most stable financial providers, but only slightly more so than full service brokers (70 percent to 69 percent). Independent investment advisors were rated stable by only 57 percent of Millionaires.
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.