A good long-term investing plan requires a well-rounded portfolio filled with a mix of mutual funds. Even in this volatile economy, mutual funds remain an important ingredient in a successful financial recipe. However, if you are active in more that one or two plans, you’ll notice that the quarterly and annual reports can really start to stack up. While these pieces of financial literature aren’t the most exciting read in the world, it’s best not to toss them in the garbage or leave them unread in some dark corner of your office. If you know what to look for, you can scan through these important documents in just a few moments and, ultimately, protect your valuable investments. Here are some important things to look for in your quarterly and annual reports:
Management changes: Look at the current roster of key executives and fund managers, has there been a change? If there has been a shakeup of epic proportions, this is a huge sign to take note of – the quality of management can change for the good and the bad. But even if just one important personnel has been replace, this could also have an effect on your accounts in the form of investing style decisions, account fees, and more.
Turnover Rate: Take note of each fund’s turnover rate, remembering that lower-than-average turnover rates are preferable. A 50-percent turnover rate is about as high as you should feel comfortable with, although some funds can be much lower.
Investment Style Change: Read through your reports to find out if the managers have shifted their investing style. For example, if you bought in with a fund philosophy of “slow-growth, blue chip” and now it’s shifted to picking risky, start up ventures, you may want to have a little chat with the fund manager.
Fee Increases: Read the fine print to see if your mutual fund is increasing fees for the year. Because funds are not required to maintain the same fees as when you initially bought in, they often tend to creep up to higher levels over the years. If there has been an increase, evaluate what this does to your overall earnings. If you don’t like the results, you can always call to negotiate (worth a try) or terminate your relationship as a shareholder.