Five Factors for Successful Fund Investing

Short-term performance is a poor indicator of future results--look to these fundamental factors instead

Russel Kinnel 8 February, 2011 | 11:53AM

Picture this. It’s the first Sunday of the season. Chelsea is at home to Man City. From the kick-off, City pump a long ball into Chelsea's penalty area; Wright-Phillips nips in between Terry and Cech and, in a flash, it’s 1-0 to City. Your friend turns round to you and says “Chelsea is just rubbish--they’ve no chance of winning the Premiership.”

You would understandably conclude that your friend doesn't have much of a basis for that conclusion. The game's only two minutes old, so how could one possibly know the outcome of the game, let alone the whole season?

Yet I get the investing equivalent of those comments every single day. Equity investments are meant for the long haul, and you can't judge equity funds by six months' worth of performance when they're designed to get you to your goals 15 years down the road. But every day I hear from investors who think a fund is great because it has a good year-to-date return or maybe two or three good years. I also hear complaints that we have recommended investments that had a bad year or two.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Russel Kinnel  is Morningstar's director of fund research. He is also the editor of Morningstar FundInvestor, a monthly newsletter dedicated to helping US investors build winning portfolios.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites