Mutual funds are required by the SEC to deliver an annual report report to shareholders each year, usually right around now. Think of these - the semi-annual and annual reports - as your fund's twice-a-year report card - it's very important (albeit tedious) to read through the annual report carefully to find out what your fund manager has been up to in the past year. In it you'll find crucial information including detailed performance data, asset level changes, changes in holdings and strategies, and pent-up tax liabilities. Chuck Jaffe tells you exactly what to look for when your mutual fund's annual report lands in your mailbox. Here are the highlights:
Performance - Find out why the fund has beaten or lagged its benchmarks.
Statements from Management - Funds should provide candid, clear explanations of what happened, what to expect and why.
The Fund's Portfolio - Look for a portfolio that is consistent with your expectations in terms of diversification, international exposure and size of companies.
Expenses and Portfolio Turnover - A fund with high or rising expense ratios is not maximizing your returns. High turnover can lead to big capital gains tax liabilities, which you end up paying.
Asset Growth - That's one investment trend that, eventually, you may want to follow.
The Auditor's Report - Don't bother reading it, just count the paragraphs. If there are more than three, there could be trouble.
Changes in Structure - while many issues are boilerplate and legalese, some proxies seek your approval for dramatic changes in style and strategy.
Taxable Gains - A fund that is tax inefficient - where the bulk of its returns come from trading profits and dividends rather than long-term buy-and-hold investing - forces an investor to pay taxes for big chunks of their gains annually.
Some managers write generic boilerplate but some write interesting commentary that really gives you some insight into the past, current, and future goings on in the portfolios. Much of the fund data in annual reports finds its way onto the MAXfunds.com fund data pages (be sure to check the 'details' links), often with our custom interpretative statistics.
Mutual funds are required by the SEC to deliver an annual report report to shareholders each year, usually right around now. Think of these - the semi-annual and annual reports - as your fund's twice-a-year report card - it's very important (albeit tedious) to read through the annual report carefully to find out what your fund manager has been up to in the past year. In it you'll find crucial information including detailed performance data, asset level changes, changes in holdings and strategies, and pent-up tax liabilities. Chuck Jaffe tells you exactly what to look for when your mutual fund's annual report lands in your mailbox. Here are the highlights:
Performance - Find out why the fund has beaten or lagged its benchmarks.
Statements from Management - Funds should provide candid, clear explanations of what happened, what to expect and why.
The Fund's Portfolio - Look for a portfolio that is consistent with your expectations in terms of diversification, international exposure and size of companies.
Expenses and Portfolio Turnover - A fund with high or rising expense ratios is not maximizing your returns. High turnover can lead to big capital gains tax liabilities, which you end up paying.
Asset Growth - That's one investment trend that, eventually, you may want to follow.
The Auditor's Report - Don't bother reading it, just count the paragraphs. If there are more than three, there could be trouble.
Changes in Structure - while many issues are boilerplate and legalese, some proxies seek your approval for dramatic changes in style and strategy.
Taxable Gains - A fund that is tax inefficient - where the bulk of its returns come from trading profits and dividends rather than long-term buy-and-hold investing - forces an investor to pay taxes for big chunks of their gains annually.
Some managers write generic boilerplate but some write interesting commentary that really gives you some insight into the past, current, and future goings on in the portfolios. Much of the fund data in annual reports finds its way onto the MAXfunds.com fund data pages (be sure to check the 'details' links), often with our custom interpretative statistics.