Mutual funds performing poorly?

Question

How can I tell if my mutual funds are performing satisfactorily?

In Sept. 2006 I opened the following 2 mutual funds, thru a broker, with a $500 investment in each, and have been auto-depositing $50 per month every month since then.
When I look at my mutual fund statement online at www.americanfunds.com, then logging into my account (by looking at the income dividends and captial gains that have posted to my account) it looks as though it is only making about 3 % Should I contact my broker and ask questions? Or is there a website to help me interpret the mutual fund info?

(1) Ticker: CIBCX American Funds Capital Inc. Bldr. C (312)
(2) Ticker: IFACX American Funds Inc. Fund of America -C (306)

Answer 1

They look ok, but not the best. You can to to morningstar.com to see how they rank vs. other funds.


To be honest though, mutual funds are appropriate for some and the wrong investment for a increasingly growing number of people.

For me, I would NOT invest in mutual funds if it weren't for having a 401K.

Overall, Mutual funds are not good (once you're educated in investing) and many people should not invest in mutual funds unless you have to (like if it were a requirement in a 401K).

Here's why.

First of all, mutual funds exist to take average person's money.

Second, mutual funds seem to be "happy" just to do better than the S&P index, since that's often the gauge. A monkey, yes monkey, can usually outpick most mutual funds. Over 60% of the mutual funds out there can't even outperform the market (CNBC just reported the current # was 72%). That's VERY SAD!

Third, mutual funds have embedded management fees in their costs. Most of these mgmt fees are 0.5% to 2% annually. This is one of the reasons they can’t outperform the market; they take a cut out regardless of how well or poorly they do!

Fourth, most mutual funds exist not to earn you a lot of money, but are more interested in NOT "losing" you lots of money. That way you stay with them and they continue to collect their fees. Did they not highlight to you that they take this fee each and every year regardless of how poorly they do?

Fifth, mutual funds are not as liquid as one might think. If you're in mutual funds and a Bush talks in the morning and you call your broker to sell because the market is now tanking, the broker will gladly take your order, but the order will not be executed until the day is over and the negative impact is already priced into the fund.

Sixth, many mutual funds charge extra "fees" if you buy/sell their fund within a certain amount of time, meaning you must keep your money in the fund 90 days to 2 yrs before you're free from the fees (read the fine print on trying to get a withdrawal). These fees can be up to 3% or so of your money as well.

Seventh, mutual funds have to be in the market. So if the market is crashing or going down like it has between May and now, then the funds still have to be in the market and taking those losses too. With some practice, you can time your monies to avoid some of those losses (it'll take practice).

Convinced yet? Need more?

Eighth, mutual funds have to be pretty diversified and so if there are hot and cold sectors, they are probably in both the hot sectors and cold sectors. However, as an investor, you can buy into just the sectors you want, like metals, or housing, or energy, etc. or right now, Brokers/Dealers, Retail, and insurance!

Ninth, mutual funds are so big, they can only invest in certain companies. A small mutual fund with $10 billion in assets. 1% of that money is $100 million. How many companies are this big where $100 million investment isn't the whole company? Do you want to limit yourself to just those larger companies like Times Warner, Microsoft, home depot, Cisco, Ebay which have been sideways for years? I think not.

A better way would be to buy ETFs (exchange traded funds) or holders. These trade like stocks, so are very liquid, and do not have the high fees like the mutual funds. Further, you can buy/sell them as you wish. They represent sectors or indexes, so buying them gives you the same diversification as the sector/industry/index, but with much less overhead!

See Amex.com (american stock exchange) or ishares.com, holders.com for more info.


You need to invest for yourself. If you can't, then sure, use mutual funds. But be aware of the shortcomings (and as you can see, there are many).

Let me know if you have further questions.

Best of luck!

Answer 2

You're doing just " okay"...like someone said, the markets just took a big hit and they take time to recover. Whether your funds are performing " satisfactorily" is up to you. You seem to be in almost all large cap companies ...which are safer, but a little slower on returns. The CIBCX has some foreign exposure - which is good, the rest of the world is " growing ": modernizing , expanding, building...and that is when bigger returns come in.
Compare the two funds in another three/four months....maybe add a little more to the better of the two, or drop one and pick a new one.... until YOU are " satisfied"...it's your money, make it work for you.... and after you build up a little bundle then you can get complacent and just let it sit in safer funds.
P.S. I'm not familiar with American funds or their site, but I think your portfolio should show you exactly what percentages you have made....there should be no " figuring" on your part. Make sure you're getting the correct " view" of your portfolio.
P.P.S Or ....put your portfolio on yahoo..make a " my page" on yahoo and make a portfolio one of your " contents"..
then add your funds with all the info date, price, shares.... and you'll have the info you want daily.

Answer 3

Go to morningstar.com and type in the tickers. It will give your funds a star rating.

Below 3 is bad
3 is marginal
4 & 5 are much better

Also make sure your funds don't have a front end load or a deferred load. If you find that they have either of these, your broker is making good money off of you. If this is the case you should leave the broker and go to a discount broker like scottrade and buy into a no-load mutual fund.

Answer 4

Consider yourself fortunate that you have not lost money. For the past several weeks, the major stock indexes have been falling. You bought when valuations were fairly high.
You chose good, safe funds. I think you should wait at least a year, then evaluate your fund's performance versus the standards.
With mutual funds, plan on having a five-year horizon. If your fund underperforms after that time, then it is time to look elsewhere.

Answer 5

Switch out of those and put everything in the American Balanced Fund C. You get a much better diversified market exposure and the 20 yr number is 12%...Make sure the account is set up for REINVEST div and cap gains

Answer 6

why are you even messing with loaded funds? oncwe you sell them its a 1% hit not to mention a 1.38 expense ratio (too high) there are far better choices out there head over to morningstar like everyone else here said to do and see for youself.