Getting to Know a Fund's Manager: Questions to Ask
Step 1: What Is Your Philosophy and Where Do You Choose Stocks From?
If you are investing in an actively managed fund, you need to judge whether the plan makes sense.
Unfortunately, the least visible aspect of a mutual fund is the person responsible for making the decisions. Although the Securities and Exchange Commission requires disclosure of a considerable amount of important material in a mutual fund's prospectus, informative discussions of a fund investment manager's approach are often lacking.
What Is Your Philosophy and Where Do You Choose Stocks From?
What Characteristics Do You Look for in a Stock?
Do You Place a Value on a Stock or Examine Other Factors?
Do You Use Timing and Technical Tools?
How Do You Handle Risk and When Do You Sell?
Where Can I Find Answers to These Questions?
However, there is material available to individuals—fund marketing literature, manager interviews by the AAII Journal (which has published over 130 interviews) and other publications, and even some fund prospectuses—that can help you understand a fund manager's approach, if you know what to look for.
Here we focus on the questions you need to ask about a portfolio manager's approach. Excerpts from past AAII Journal interviews of fund managers, most of whom have above-average long-term track records, are used to illustrate what these questions can reveal.
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