Make sure to track when mutual fund managers move


For those that invest in mutual funds I want to bring to your attention a point that often gets overlooked. You’ve often heard that you can’t pick mutual funds based solely on their past performance – I’m not sure who said it, but to paraphrase: if that were the only selection criteria then librarians would be the richest people on earth!

MagnifyingGlassOnPrint.jpgThere are numerous reasons for not focusing on just the 10 year track record of a fund but the one I want to highlight today is that mutual fund managers, just like you and me, don’t necessarily stay at the same job or employer for their whole career! Quite often they can be lured away by a higher paying offer at another fund company – or the promise of an ownership stake in a new fund company, etc.  So perhaps that index-beating performance you’ve "bought in to" has walked out the door and the incoming mutual fund manager may not be as sharp! The information on your mutual fund’s manager is readily available and Morningstar will provide the history of all the different fund managers that your mutual fund has had.

So if you do a little digging and research you will find that maybe the fund you picked (based on it’s past performance) is no longer being managed by the manager who guided that fund to it’s spectacular performance! And say what you want about mutual fund managers, there ARE stars AND duds out there. I’ve come across many investors who are eager to quote the 10 year performance of their current mutual fund holdings only to inform them that the manager responsible for that performance was no longer managing the fund when they bought it…

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Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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