Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
FundSpy: Morningstar's Inside Secrets to Selecting Mutual Funds That Outperform
04/01/2009 12:00 am EST
You might think you don’t need another book about mutual funds. After all, mutual funds have been around so long that most people own them—at least in a 401(k) or Individual Retirement Account. Additionally, so much has already been written on the industry that you might reasonably ask what’s left to say?
Well, you would be wrong—on two accounts:
1. Investors, after being severely beaten from the recession and market fallout, are desperate for solid investments to help them build back their portfolios, and good performing, strong funds can help you do that, and
2. Kinnel’s book uncovers and explains an assortment of criteria that most individual investors—and many pros—need to know in order to choose their funds wisely
The market is beginning to show signs of recovery, and once the uptrend is in full swing, the shysters and hypesters will be crawling out of the woodwork, luring investors with false guarantees of overnight, incredible gains.
Kinnel’s book comes at a crucial time, giving investors good tools—not fake promises—to help them find the best investments.
And backed up by his years and track record at Morningstar—my favorite place for fund research—investors would be wise to listen.
The book begins by discussing statistics that will be familiar to most investors—that most funds don’t beat the market, or even the returns of individual fund investors. Kinnel goes on to show how choosing the right funds can alter that result, allowing investors to consistently find funds that—through compounding over the long haul—will do better than their benchmarks.
Most investors focus on performance and expenses, but Kinnel explains that these concepts are often misunderstood. He spends a couple of chapters showing you how to pull apart these numbers to get the maximum bang for your buck.
A couple of parameters that Kinnel deems crucial are categories not often discussed when folks are contemplating a new fund—management ownership and trading costs. The first will make a lot of sense to investors who like to see managers ‘put their money where their mouths are’, but the second concept is one most investors will have likely never considered in this light. And Kinnel’s explanation of this cost that can quickly decimate your returns is worth the price of this book.
Kinnel spends quite a bit of time imploring investors to make sure they understand the strategies and risks of the funds they are considering. And he gives great advice on separating the weak from the good managers, including a very couple of informative chapters in which he actually analyzes a number of funds and their managers, giving them his thumbs up or down.
Fortunately, for investors who like to do their own research, Morningstar has built a number of Kinnel’s parameters into their ratings, so you don’t have to do a lot of the legwork yourself.
The final chapter of this book includes a big bonus—a list of funds that passed all of Kinnel’s tests with flying colors.
These funds might just be a great way to start rebuilding your portfolio. But even if you’re not yet ready to slip back into the market, this book will at least give you a better understanding of the tools available to assist you when that time arrives.
In a side note, I want let you know that this is my last book review for MoneyShow.com. I am not leaving the business, but actually returning to my roots—writing my own investment letter, where I will focus on undiscovered, low-priced stocks.
I have thoroughly enjoyed my time with Money Show and leave behind a stellar team of folks who have great vision for continually enhancing the products that help thousands of investors like you achieve your financial goals.
I thank you for your support and applaud you for your dedication to improving your investment skills. I wish you a future filled with great prosperity, good health and happiness.
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