Mutual funds are well maintained type of shared venture which pools funds from many stockholders to purchase bonds, stocks, short-term as well long term money market instruments, etc. In the USA, mutual funds are normally registered with SEC or Securities and Exchange Commission. The SEC is monitored by a board of directors or trustees. This board is in charge of all the funds, their responsibility is to ensure that the funds are managed in a fair and balanced manner and in the best interest of the investors. The fund sponsor or management company buys and sells the fund’s investments according to the fund’s investment plan. In order for the fund sponsor to be eligible for managing mutual funds, he must be a registered investment adviser. Complex funds are funds that are under the supervision of the same sponsor and have the same brand name, sometimes known as family funds.
As with any other investments, mutual fund’s past performance does not guarantee of any future success. The long-term success or failure of the mutual funds investment will depend on factors such as; the age and size of the fund, recent changes in the fund’s process, the funds risk and volatility, etc, so, you should be looking at more than just the fund’s past occurrence when considering investing in mutual funds. Take your time to read and understand the fund’s prospectus as well as the shareholder reports to make informed decisions.
You should also consider the age as well as the size of the fund. Before investing in any funds, make sure to read the prospectus, it is important to know how long the fund has been operating as well as the size of the fund. Funds that have been newly created or small funds tend to have the best short-term performance records, as they may only invest in a small number of stocks. A few stocks that are successful can have a huge impact on their overall performance.
But as these mutual funds start to grow larger and multiply the number of stocks being owned, each stock can have less impact on the fund’s performance, making it more difficult to endure the initial results. Looking at how the fund has performed over a long period of time will help you determine the how the fund has sustained its performance. And how it has withheld the ups and downs.