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Mutual Funds

The Historic Performance

The Historic Performance of a mutual fund is possibly one of the best indicators of how that fund will perform in the future, although it is no guarantee. The historic performance should be looked at fairly carefully to make sure that all factors are considered when one evaluates the historic performance. A ten-year historic performance rate of return of 22%, for example, would be considered to be a great return. If, however, in the last two years the rate of return were two percent, instead of an average of over 20% as the DOW has posted for the last few years, while the overall fund rate for the last ten years is great, this may indicate a problem. The fund may be on a decline, the management team may have lost its "luster," or there may be other significant factors in the near-term investments made by the fund. If this trend continues at the 22%, ten-year returns may turn into a 10% or less return in a few more years. An investor ought to pay attention to the one-year and three-year investment returns as well as the more recent investment returns such as the last four weeks, the last two quarters and related results. Economic conditions may also affect funds, and these may be important to the fund, and the investor, or they may be considered to be minor fluctuations for a long-term investor.

Mutual Funds
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