A. For mutual fund investors, there is no shortage of information available, but what's the key information to learn about a mutual fund? We will discuss this topic in a 5-part mini blog series.
Part 1.The fund’s basic profile
The first thing to learn about a fund is to get its basic profile, which includes: fund name, NAV (net asset value), price change, year-to-end return, yield, and a few other key facts.
Fund name & company:
A fund's name sometimes reveals the fund's investing strategy. For example, AMG TimesSquare Small Cap Growth Instl (TSCIX) clearly states its focus is on Small Cap growth.
In addition to the fund name, the company behind the fund may also give you an idea about the fund’s investing style. For example, Vanguard funds have a reputation of low cost.
Investing asset class/category:
Most mutual funds fit into the following categories: equity, bond, money market, or a mix of above.
You may want to know a fund's Net Assets information if you want to invest in funds with certain size limitations. For example, you might be looking for a mega fund which typically has net asset over 1 billion dollars.
NAV & Price:
NAV is the fund’s net asset value per share. While a fund's price mirrors its NAV, they are not always the same. A fund's price may have a premium or discount over its NAV. Also, while NAV fluctuates during the trading hours, an investor could only buy a fund at one price - usually after the market closes.
Price, price change, yield, YTD return:
The best way to use information reported by these metrics is not to look at these numbers themselves, rather it's best to compare them with those of benchmark index/category so you could have a better .understanding of the fund's performance.
This includes expense ratio and other management fees that might occur. Cost is an important factor since it will eat into a fund's performance, even a fund is losing money. Index funds are usually cheaper than actively managed funds.
The longer a fund has existed, the more data you could collect, therefore giving you more information about a fund's historical performance, especially how it performs when the market is at different cycles.
In our next blog post, we will discuss how to check a fund's past performance.