Top Performing Mutual Fund as of June 2010

Our highest scoring mutual fund for the month of May 2010 was :

  • Fidelity Select Transportation –  b shares (Stock Symbol: FSRFX)

Here are the performance numbers for the top performing fund:

  • Rank last month #4
  • 1 month return –  (5.5%) negative
  • 3 month return – 12.6%
  • 6 month return – 31.1%
  • 12 month return – 66%

Here are a few other data points for this fund that we believe are important factors to consider if you are thinking of investing in it:

  • Performance During Bear Market – 2007 to 2009 :   (58%) Negative over period of time
  • Performance During Bull Market – 2002 to 2007 :   180%

Again please keep out methodology in mind, here is a synopsis:

  • Our time frames for analysis is a little different than many other publications.  We do not believe that high rates of return measured over very short term periods is meaningful.  Even a Monkey can throw darts and win a over a short period, but longer term results takes strategy and smarts and wisdom.
  • We also eliminate funds that do not have a long term track record.  We don’t list funds unless they have a long historical record.  This tends to eliminate the charlatan flash-in-the-pan types of investment vehicles that happen to get lucky.
  • These are the top performing mutual funds, i.e., funds with the highest rate of return when measured as an average return over a combined period of 1 month, 3 months, 6 months and 12 months as of 30 April, 2010.

All the best to you.  Happy investing.

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Top Performing Mutual Fund – As of May 2010

As of April 30, 2010 – Best Stock Fund is (Drumroll Please) :

  • Profunds UI Small Cap – Symbol UAPIX

Before you move away from this page of the best performing Mutual Funds, we need to explain how we define “best performing.”  In the investment world and particularly, mutual fund world, “best performing” can be measured in a myriad of ways.

We know you just want to bottom line, but the bottom line needs explaining. First, let’s define “performance.”  This is rather easy because performance for most people, including us, simply means highest return.  That is, the particular fund had the best return of every dollar invested.  However, defining “best” is not so simple

Time Frame of Performance:

For example, we need to define the time frame of the return – is it the top performing mutual fund this month, last year, over the past 5 years, or something else.

Riskiness of the Investment:

What do we mean by risk?  Mutual fund investments are divided up into asset classes.  And each asset class has a different risk/return profile (sorry folks, there is no free lunch).  I’m afraid you can’t have your cake and eat it too.  There is no such thing as a low risk investment that also has consistently higher returns.

It is not meaningful, therefore, to compare bond mutual funds in the same light as stock mutual funds.  We have to compare apples to apples.  As you will see, investments have a different return depending on the asset class of the investments.  What we mean by this is that, for example, a stock mutual fund generally has a higher return over a longer period of time but tends to fluctuate wildly over the short term – therefore it is usually considered “riskier.”  Bond funds, on the other hand, tend to have lower returns over long periods of time, but they do not fluctuate as much from year to year – therefore they are generally considered less risky.

If your tolerance for risk is low, you will want to invest in less risky investments such as bonds.  But you will need to be prepared to have lower returns in exchange for greater stability.

Bottom Line:

So, what’s the bottom line.?  I am sure you are saying, “just show me the results already!”  Well, we will list them here, but be sure to read the explanation so that you know how we derived at the results.  You may very well see a different list in other publications, but you need to understand that this is because our methodologies of measuring “best performance” is different.

As of April 30, 2010 – Best Stock Fund is (Drumroll Please) :

  • Profunds UI Small Cap – Symbol UAPIX

Our Methodology Explained:

Our time frames for analysis is a little different than many other publications.  We do not believe that high rates of return measured over very short term periods is meaningful.  Even a Monkey can throw darts and win a over a short period, but longer term results takes strategy and smarts and wisdom.

We also eliminate funds that do not have a long term track record.  We don’t list funds unless they have a long historical record.  This tends to eliminate the charlatan flash-in-the-pan types of investment vehicles that happen to get lucky.

These are the top performing mutual funds, i.e., funds with the highest rate of return when measured as an average return over a combined period of 1 month, 3 months, 6 months and 12 months as of 30 April, 2010.

There you have it.  Stay tuned for updates over the coming months.

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What is The Best Index Fund

If you had to choose just one index fund to invest in – what would it be?  We cut through the clutter and give you the bottom line on What is the best Index Mutual Fund.

There are generally two categories of funds – actively managed and Index funds.

What does Actively Managed Mean?

Actively managed funds are managed by a fund manager, which is sometimes composed of a team of managers, who buy and sell the underlying investments after doing extensive research and analysis.  They typically buy and sell funds more frequently than the more passive index funds.  As you might imagine, these funds are typically more costly because you will be paying more for all the salaries of these individuals as well as brokerage fees for all the investments that the fund will be buying and selling (In the brokerage world, you pay for every transaction)

Okay then, What is an Index Fund?  And which one is the Best?

An index fund typically tries to replicate some type of underlying set of investments or index.  The most well-known index is perhaps the S&P 500, which is an index consisting of the 500 biggest companies in the U.S.  These companies represent over 90% of the value of all companies in the U.S.  Thus, by investing in this index, you are betting on nearly all the companies of the US or pretty much the entire American economy.

There are a slew of mutual funds that try to replicate  the performance of the S&P 500 by buying a little bit of all 500 companies.  The biggest and most popular of these funds is the Vanguard S&P 500 Index Fund.

Which one is the best?  Well, in my opinion, the best one is the one with the lowest cost.  Why?  Because since any S&P 500 index fund will be buying the same stocks, you can pretty much bet that if all things were equal, all these index funds would have the same performance.

But alas, this is NOT the case.  Why do some index funds perform better than others?  Well, in one word, it’s due to different COSTS.  The Vanguard S&P 500 Index funds happens to have one of the lowest costs around because the company is extremely efficient.

So there you have it.

BOTTOM LINE

The S&P 500 Index is a good place to invest as a core holding in your portfolio.  And for my money the Vanguard S&P 500 Index Mutual Fund is the best one around for overall efficiency, cost and value.  You will not go wrong in choosing this fine mutual fund.

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