Well, you might ask what the best performing mutual funds are. Don’t. The reason is that there could be no yardstick to measure the probability of success while assessing the future performance of the funds. Trying to look at the past records of the mutual funds to guess their future performance is like looking back to see what is ahead. That is simply impossible.
However, Woody Allen says, “if you haven’t failed, you haven’t tried”. There are companies that assess the mutual funds and give ratings based on a certain criteria. These criteria are retrospective, where the fund’s previous performance over the last five or ten years are noted. Based on that observation, the best performing mutual funds are marked. However, this method hasn’t proven encouragingly effective. In such a case what a diligent and cautious investor like you would do?
Morningstar is the most popular among companies that try to rate funds. True to its name, it assigns stars to all the funds, five for the best performers, and only one star for the poor ones. However, doubts are raised about its decisions, since it judges the funds based on their past records and this system is inherently flawed.
Another company that dabbles in this difficult task is the Lipper Leader Fund Ratings. They do not assess the funds and their worth based on past performance as much as they rely on analytical formulas. They do a factor on the past performance, and use the five criteria of total return, preservation, consistent return, tax efficiency and expense to rate the funds. However, the investors have to register with Lipper to obtain the fund rankings.
Business Week along with other business journals assess the mutual funds ratings on a yearly basis. Business Week publishes the “Mutual Fund Scorecard” in their magazine yearly, but this scorecard is also available online in their website, which is updated every month so that you can also get the latest reviews. This will help you to have an idea about the best performing mutual funds.
There are other magazines that deal with business and investment reviews that publish mutual funds and stock picks either annually or monthly. If you are capable of discerning all these information and filter them properly, you will be able to wisely deal and invest, and your money will not only be safe, but it will also turn productive.
The “rigorous criteria” is used by Schwab’s One Source Select List so that they could publish their opinions about the highest rating funds that they publish quarterly. They draw diagrams that could help you to easily find out the risk level on each fund. They even offer well-drawn tables and figures that will tell you all that you need to know about each fund. However, the slight problem is the fact that they do not really explain the way their experts have been able to arrive at such conclusions on each fund. They write a disclaimer that is uselessly long that precedes the ratings. However, this is generally not counted against their performance and the Schwab name is well known among business and investment companies.
If you would like to invest after knowing the rates of each mutual fund, it is advised that you get your information from different rating sources that use different rating systems. This way, the collective information will help you in making better decisions.