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Good mutual fund returns are hard to come by these days. Most actively managed funds are don’t give their investors market-beating returns. It shouldn’t come as a surprise though. Regulations have have helped this industry (and also hurt it), and as a result, this has dragged down returns for many individuals.
While you may find a few ways to get better returns from your mutual fund, keep in mind that these products will rarely be the panacea that you’re told they are.
Your mutual funds are probably posting inflated returns. By not paying attention to historicals that are posted by the fund company, and instead asking an independent adviser to help you calculate your true return, you’ll get a better idea of how you’re doing. The mutual fund company typically shows you the simple average instead of the compound average which will result is higher returns on paper. It’s good for business but not for your portfolio.
If you have a scientific calculator or a lot of time on your hands to do it manually, you can calculate the compounded return over time for these (or any) investment.
An alternative to trying to get more out of mutual funds is to get rid of them. One of the basic rules of investing is to understand what you are investing in. Most people don’t understand mutual funds. They don’t understand every business that the mutual fund holds. Even most financial advisers don’t understand the businesses that the mutual funds they sell holds.
One final point to consider is choosing mutual funds that invest in value stocks or smaller companies. Also, if your fund itself is small, that can be a big plus. If the fees are low, and the fund is small, under the right management you could end up seeing strong growth that will help your portfolio overcome years of lackluster performance.
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