How do you decide which mutual funds and ETF's to buy? What methodology do you use? I usually look at past annual returns and losses and then try to find a security that has low YTD and 1-year performance, compared to past performance; if it is low compared to past performance, I buy. I also look at Morningstar risk/return ratings, and star ratings. What do you think?
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google. brevity is.
RisingSun96815 said:How do you decide which mutual funds and ETF's to buy? What methodology do you use? I usually look at past annual returns and losses and then try to find a security that has low YTD and 1-year performance, compared to past performance; if it is low compared to past performance, I buy. I also look at Morningstar risk/return ratings, and star ratings. What do you think?
I construct my asset allocation by considering historic returns of various asset classes taken with a grain of salt, an assumption that asset correlation cannot really be determined by looking at past results and just pray that foreign and domestic stock returns don't fall into step, my personal ability to accept risk, and the need to take on risk. Naturally time frame in involved, but I'm under 30 still. I then figure out how to obtain said asset allocation plan with low cost index vehicles, so that asset drift is minimal. I then buy said vehicles.
I ask random people on the internet to pick stocks for me
I take lists of funds with me to the target range. I load a bullet in the chamber, spin it, slam it home, and start shooting. It combines the fun of Russian Roulette with the thrill of investing.
If you had used that method this year, the chances are that you would have pulled lots of REIT, consumer discretionary and financial heavy funds. Not saying its a bad investment in the long run but if you think you will get a nice return just because the fund have underperformed till date but will go back to historic performance this year, you will be mostly be disappointed.
How do I buy mutual funds? Low cost index funds. I use ETFs for sectors like the commodities(Gold, Oil, Ag) that are not well represented in index MFs.
RisingSun96815 said:How do you decide which mutual funds and ETF's to buy? What methodology do you use? I usually look at past annual returns and losses and then try to find a security that has low YTD and 1-year performance, compared to past performance; if it is low compared to past performance, I buy. I also look at Morningstar risk/return ratings, and star ratings. What do you think?1. Asset allocation
2. Cost
3. Risk (standard deviation)
4. Bear market performance.
5. Past performance over the long term, relative to peers and the whole market, and over all assets owned by the fund (i.e., factor for a few lucky stock or sector picks).
5. Ratings, but only to avoid the very worst-rated funds, i.e., no 1-star funds.
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