Criterions to Selecting an Investment Fund

The pamphlets that the own fund publishes: these inform about:

• The description of the portfolio (investments, geographical distribution, etc.)
• The commission charged (of management, openings and cancellations).
• The names of the managers of the fund and other data of interest.
• The information about the results of past exercises:
• These can be obtaining at the ranking of commercialized funds on the country that is published periodically at the financial press. They inform of:

• The annual rate composed of profits for each fund
• Its variability or level of risk
• The date of launching, etc.

At the moment of choosing your type of funds between all the funds formerly mentioned, the investors usually specially consider: the historical profitability of the fund, the commissions applied, and the minimum required investment, etc.

These criterions, in spite of being a good guide for deciding, can result insufficient if they don’t consider also factors such as: the risk implied in the investment, the consistency of the results, etc.

Before it, it is convenient to take in account, at least, four fundamental elements to decide for one or other type of fund:

Management goals
The information in reference to the management objectives of the fund can be obtained in the pamphlet published by the fund, there it appears the details about the investments that the management of the fund is authorized to realize. Also, revisions of these objectives appear in the annual and half year reports.

The investors must select those funds which objectives are coherent with their own personal preferences.

Coherence in the results of the funds
An important criterion at the time of choosing a fund is to verify how they work at bad and good markets, rising markets or weak markets.

To measure the coherence of these funds, the volatility of the results is usually used. They are variations that the liquid securities in a fund have. When more volatile, greater the risk.

The volatility of a fund depends on the composition of the assets that constitutes its portfolio and of the kind of management they realize.

To make an analysis of the yields, the past data should be examined.

In occasion is also convenient to inquire if the actual managing team has accomplished any good results in the past.

The objective of the investor is to find a fund with consecutive coherent results and, preferably, for them to have in charge the same management team that accomplished these results, due that it is a sign of consistency.

Coherence of the management
To analyze the stability of the management of the fund is necessary to determine who are its promoters and if the people who obtained good results in past exercises continue to be part of the management team or not.

However, sometimes the funds have its own well-defined strategy and that its results are coherent even before the variations of the management team.

Although in the information pamphlets of the funds they usually don’t give details of the management team, the financial press generally informs of the changes of managements, at least for the more important investment funds.

Commissions and other costs
A fund may charge to their participant’s two types of commissions:

• Subscription/refunding commissions:  that are paid at the time of buying or selling the participation.
• Management commissions

Beginner Money Investing Government Debt Investment Funds Criterions to Selecting an Investment Fund Other Types of Collective Investments: Unregistered Security Investment Associations