Homepage / Investment / Here's why you shouldn't toss those mid-year fund reports in the trash
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election


Here's why you shouldn't toss those mid-year fund reports in the trash

If you’re among the many mutual fund investors who just received a semiannual shareholder report, be sure to take a look before you toss it in the recycling.

“There’s a treasure trove of information in these reports,” said certified financial planner Avani Ramnani, director of financial planning and wealth management at Francis Financial. “Some of it is dry and technical, but [investors] can look for things to make sure the fund is doing everything they thought it was doing.”

For starters, just because you keep hearing about how strong the stock market has been since the November election, your fund might not have followed suit.

Most references to the market’s gains are based on the major stock indexes.

For instance, the Standard & Poor’s 500 index, generally considered a broad indication of how U.S. companies are faring, has gained 7.63 percent this year through July 6. The Dow Jones industrial average, which measures the performance of 30 large U.S. sticks, rose 7.88 percent, and the tech-laden Nasdaq Composite Index is up 13.12 percent.

The Barclays Capital Aggregate Bond Index, which focuses on U.S. investment-grade bonds, has posted a 2 percent gain.

But not all stocks and bonds are moving in lockstep. The S&P Retail Select Industry index, for example, was down more than 7 percent through July 3. While that might come as no surprise given the challenges facing the industry, there’s always a chance your fund was overweighted in retail or another poor-performing asset that served as a drag on gains.

So depending on the specific investments, a fund’s performance could vary wildly from that of the broader market. And even though the data in the report is typically a couple of months old, it’s worth checking to see if the fund performed as you expected and to see how it compared to whichever index it uses as a benchmark.

Beyond returns, here are a few other things to check out:

You can typically find this in a chart near the front, after a management discussion and some performance data.

The data shows the dollar cost associated with a hypothetical $1,000 invested in the fund during the six months covered in the report. This number excludes transaction-related expenses like a sales charge when you buy the fund (called a front-end load) or a redemption fee (back-end load). However, it lets you figure out exactly how much the fund is costing you vs. seeing a complicated explanation of fees in a prospectus.

Say the chart shows that a $1,000 investment paid $1.15 in expenses during the six months covered. If you have $100,000 invested, it cost you one hundred times that amount or $115. Also, semiannual reports are required to include the cost of a hypothetical $1,000 invested at a return rate of 5 percent. This information lets you more easily compare different funds’ costs.

Meanhwile, funds so-called expense ratios can range from less than 0.10 percent of assets (i.e., index funds and exchange-traded funds) to as much as 2 percent or more for specialized actively managed funds.

Just remember that the costs deducted from your investment reduce your overall returns. If you pay 1 percent annually, for example, your account balance after holding it for 20 years is reduced by 18 percent.

“Make sure the cost is palatable to you,” Ramnani said.

You’ll find a table (usually near the front of the report) that includes a breakdown of the fund’s investments by category (i.e., industry sector, geographical region, etc.).

Look at this to make sure there are no surprises. For example, if you think you’re in an international fund and see a lot of emerging-market stocks, the fund might be riskier than you thought. Or, in a bond fund, where credit quality differs among types of bonds, you could discover that junk bonds comprise an uncomfortable amount of the fund’s holdings.

These things matter not only as a measure of your risk exposure, but also because they are tied to performance. If your fund held too many poor performers or investments you thought were off the table, the fund’s results can differ from expectations. “You want to make sure the fund’s management is investing as you thought they were,” Ramnani said.

While the mid-year reports are not required to include their top 50 holdings, some funds will include it (or a partial list). It’s worth checking this information for surprises as well.

Although semiannual reports are not required to include this, many funds provide one. This gives you the chance to peek into the thinking of the people running the fund. The discussion might explain factors that contributed to the fund’s performance.

It also could include an outlook, which is where you can get a feel for management’s expectations going forward.

“You can get a sense for if they’re nervous or feeling positive,” Ramnani said. That, in turn, could affect how you feel about remaining in the fund, depending on how it meshes with your other investments and goals.

Semiannual reports are required to include information related to the people in charge of the fund. Beyond compensation — which varies among funds — you can look to see if there’s been a change in management. While not necessarily a bad thing, it’s worth noting.

Ramnani said that when her firm is choosing funds, they look for investment teams who’ve been running the portfolio for at least three years.

“A new team of managers haven’t proven their performance yet,” Ramnani said.

Source: Investment Cnbc
Here's why you shouldn't toss those mid-year fund reports in the trash

Comments are closed.