The Art and Science of Mutual Fund Selection

Opiela, Nancy
January 2004
Journal of Financial Planning;Jan2004, Vol. 17 Issue 1, p36
Academic Journal
With no obvious place to look for superior returns, with risk an issue of increasing importance for clients, and as the ethics of some fund companies creep into the news, evaluating and selecting mutual funds for your clients is more challenging than ever. Planners approach the more than 10,000 mutual funds armed with a variety of screening tools from Morningstar, Ibbottson Associates and Value Line. Once planners have a short list of funds, it is time to delve into the list in a little more detail. For many planners, manager tenure emerges as the most significant factor. In addition to checking out a manager's résumé and track record, planners value the ability to communicate with the fund manager. In addition to manager tenure, planners are paying careful attention to a fund's level of risk. One way planners seek to control risk is to spread assets among fund families. Once planners choose funds, they monitor them very closely. Planners agree that mutual fund governance issues are only going to get more intense, making it increasingly important to ensure that clients understand what is going on.


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