What to Look For
Understand how the fund/stock sits:
- Size: large cap, mid cap, small cap
- Sector: by country, by industry
- Fixed income vs long term capital appreciation
- Style: growth vs value
- Domestic vs International
- Other factors: emerging market, SRI, REIT, commodities
Check historical performace
- versus the benchmark
- versus similar funds/stocks
- focus more on long term (5 years)
Manager
- how long has the manager been there? best >5 yrs
- performance during manager's tenure
- should be invested themselves
Risk profile
- Morningstar analyst rating
Expenses
- opt for no sales charges / loads / commissions
- low expense ratio (under 1%)
- low turnover (under 40%)
- low cash reserves
- 12b-1 fee = marketing = avoid
Volatility
- standard deviation
Some definitions:
SRI - Socially Responsible Investing / Socially Conscious
There are lots of different kinds of socially conscoius approaches. Sometimes it concerns avoiding companies that produce or sell alcohol, tobacco, gambling . Another vein is including companies that are engaged in environmental sustainability or clean energy. Also, sometimes this approach is concerned with fair employment practices or promoting human rights.
ETF - exchange traded funds
mutual fund that tracks an index, commodity or category of assets, but trades like a stock.
Individual Stocks
Benchmarks
Index Funds
Diversification
Tax Implications