Winning With Mutual Funds

As professionally managed investments, mutual funds can seem to be a convenient and secure way to earn returns economically, but their success is dependent on competition against others in their sector. This means that those who manage your portfolio need to have a significant history of returns to prove that their investment style suits this market-reliant method of earning dollars. Knowing how to be successful with your portfolio means having the savvy to choose managers who are worth their salt.

Passive Portfolios

By definition, mutual funds lack significant diversification and are thus heavily reliant on professional managers. While many of today’s investors are shrewder with stocks than they were in the past, the strongest asset that mutual funds used to have is the fact that they gave light-pocketed investors the means to hire a professional. According to Forbes , a trend has emerged in which investors do away with these advisors, leaving their stocks static over the long term in hope of automatic returns. Passive portfolios remove another of the funds’ largest assets: the fact that they can be actively shifted to win larger returns if they are managed well. A view of the aggression and constant action in the New York stock exchange reveals that those with the backing of formal training are far from passive during their workdays. Passive portfolios tend to underperform, leaving investors with not much money at enormous risk.


Bryant University ran a study of 2,846 funds over a decade, comparing managers’ tactics and returns. Those who didn’t last the first year with their funds won returns of 0.074%, while those who were successful for 10 years ran funds that underperformed during the first couple of years until returns began to peak. If this research applies universally, it suggests that it is imperative to hang onto portfolios through the ‘grace period’ if the market is to be beaten. Even so, this research also showed that mutual funds performed better within three years, with negligible benefits over the long term.

Balanced Target Maturity Funds

According to Entrepreneur Magazine,  balanced-maturity-funds do not fulfil their returns guarantee when they are not left to mature. They need between one and two decades to reach full maturity. Balanced-target-mutual-funds are a different option that are riskiest during the first three decades, making them another long-term option. Their evolution is based purely on time and must therefore be selected according to the results of tools such as risk tolerance questionnaires. They are extremely targeted, suiting a unique personality of investors with a specific amount of wealth, risk tolerance, and risk preference.

Financial Outlay

According to, the hidden costs of mutual funds can make this kind of investment particularly risky, since portfolios that make a loss still carry fees. A money manager will need to be paid for the entire investment term. Earnings are subject to capital gains tax, an expense that cannot be escaped.


It is possible to achieve diversification with mutual funds. By blending foreign and local, bond and stocks funds into a single portfolio, losses can be absorbed by increased returns. Annual rebalancing decreases risk. While long-term performance should be considered when choosing stocks, over-performers may lose their status quickly.

Exit mobile version