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For illustration purposes only. Past performance is not an indication of future performance.
Evaluating Mutual Funds and ETFs
Presented by:Matthew Vandre, MS HES, CFEIMoney AdvisorFrancis Investment Counsel LLC
For illustration purposes only. Past performance is not an indication of future performance.
For illustration purposes only. Past performance is not an indication of future performance.
Our Agenda
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For illustration purposes only. Past performance is not an indication of future performance.
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For illustration purposes only. Past performance is not an indication of future performance.
What We’ll Cover Today
What a mutual fund is
How mutual funds are different
How to evaluate mutual funds
For illustration purposes only. Past performance is not an indication of future performance.
What is a mutual fund?
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For illustration purposes only. Past performance is not an indication of future performance.
The asset available for purchase in your 401(k) is which of the following types?
A. Stock
B. Bond
C. Mutual Fund
D. ETF
For illustration purposes only. Past performance is not an indication of future performance.
C. MUTUAL FUND
For illustration purposes only. Past performance is not an indication of future performance.
Equity Market Asset Types
SecuritiesEquities Fixed Income
Stock Bond
Ownership of a Company Loan to a Company
Investor $$$
Investor $$
Investor $
Company ABC
Company ABC
Investor $$$
Investor $$
Investor $Investor InvestorTRADING
(buy/sell)
Company ABC
Investor $$$
Investor $$
Investor $
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For illustration purposes only. Past performance is not an indication of future performance.
Exchange Traded Fund
Securities
Exchange Traded Fund (ETF)
Stock flavored Bond flavored
Ownership of fund gains and losses
Fund Manager
Investor $$$
Investor $$$
Investor $$$
1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21,22,23,24,25,26,27,28,29,30,31,32
,33,34,35,36,37,38,39,40,41,42,43,44,45,46,47,48,49,50,51,52,53,54,55,56,57,58,59,60,61,62,63,64,65,66,67,68,69,70,71,72,73,74,75,76,77,78,79,80,81,82,83,84,85,86,87,88,89,90,91,92,93,94,95,96,97,98,99,100,101,102,103,104,105,106,107,108,109,110,111,112,113,114,115,116,117,118,119,120,121,122,123,124,125,126,127,128,129,130,131,132,133,134,135,136,137,138,139,140,141,142,143,144,145,146,147,148,149,150,151,152,153,154,155,156,157,158,159,160,161,162,163,164,165,166,167,168,169,170,171,172,173,174,175,176,177,178,179,180,181,182,183,184,185,186,187,188,189,190,191,192,193,194,195,196,197,19
8,199,200,201,202,203,204,205,206,207,208,209,210,211,212…………….50 – 5,000 Companies
Investor InvestorTRADING (buy/sell)
For illustration purposes only. Past performance is not an indication of future performance.
Assets in your 401(k)
Securities
Mutual Fund
Stock flavored Bond flavored
Ownership of fund gains and losses
Fund Manager
Investor $$$
Investor $$$
Investor $$$
1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21,22,23,24,25,26,27,28,29,30,31,3
2,33,34,35,36,37,38,39,40,41,42,43,44,45,46,47,48,49,50,51,52,53,54,55,56,57,58,59,60,61,62,63,64,65,66,67,68,69,70,71,72,73,74,75,76,77,78,79,80,81,82,83,84,85,86,87,88,89,90,91,92,93,94,95,96,97,98,99,100,101,102,103,104,105,106,107,108,109,110,111,112,113,114,115,116,117,118,119,120,121,122,123,124,125,126,127,128,129,130,131,132,133,134,135,136,137,138,139,140,141,142,143,144,145,146,147,148,149,150,151,152,153,154,155,156,157,158,159,160,161,162,163,164,165,166,167,168,169,170,171,172,173,174,175,176,177,178,179,180,181,182,183,184,185,186,187,188,189,190,191,192,193,194,195,
196,197,198,199,200,201,202,203,204,205,206,207,208,209,210,211,212…………….50 – 5,000 Companies
Investor FUNDTRADING (buy/sell)
For illustration purposes only. Past performance is not an indication of future performance.
Mutual Fund Differences
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For illustration purposes only. Past performance is not an indication of future performance.
How many different kinds of mutual funds exist today?
A. 1,253
B. 5,321
C. 7,952
D. 2,351
For illustration purposes only. Past performance is not an indication of future performance.
C. 7,952
https://www.ici.org/research/stats/trends/trends_03_18
For illustration purposes only. Past performance is not an indication of future performance.
How Funds are DifferentA whole orchard
of different mutual funds reduces risk …think about it.
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For illustration purposes only. Past performance is not an indication of future performance.
How Funds are Different
LARGE MID SMALL
VA
LUE
IND
EX
GR
OW
TH
Size of company
Value and growth
Region of the world
For illustration purposes only. Past performance is not an indication of future performance.
How Funds are Different
Growth
Inflation
InflationaryUpturn
StagflationRecession
EmergingMarkets Equity
BondsTIPS Bonds
Stocks
EmergingMarkets Debt
Cash HardAssets
For illustration purposes only. Past performance is not an indication of future performance.
Active vs. Passive (Index)
Try to beat the market Try to match the market
More expensive
Historically better in down markets*
Less expensive
Historically better in up markets*
*Historically passive outperforms active management in periods of economic expansion. Additional supporting details available upon request.
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For illustration purposes only. Past performance is not an indication of future performance.
Lifestyle Allocation Funds
Growth
Static
Balanced
Income
All in one
Active and passive
For illustration purposes only. Past performance is not an indication of future performance.
Target Retirement Date
Age based All in oneActive and passiveGlide path
For illustration purposes only. Past performance is not an indication of future performance.
Evaluating Mutual Funds
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For illustration purposes only. Past performance is not an indication of future performance.
Past Performance is the best indication of future returns?
A. True
B. False
For illustration purposes only. Past performance is not an indication of future performance.
B. FALSE
For illustration purposes only. Past performance is not an indication of future performance.
Morningstar.com
Fidelity Contrafund (FCNTX)
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For illustration purposes only. Past performance is not an indication of future performance.
Fund Manager Experience
$2,500
1 star = worst 2 star = below average3 star = average
4 star = above average5 star = best
For illustration purposes only. Past performance is not an indication of future performance.
Fund Manager Experience
For illustration purposes only. Past performance is not an indication of future performance.
Fees
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For illustration purposes only. Past performance is not an indication of future performance.
Fees
For illustration purposes only. Past performance is not an indication of future performance.
Measuring Volatility
For illustration purposes only. Past performance is not an indication of future performance.
Benchmark
This is the benchmark. Comparing this mutual fund to anything else would likely not be an accurate comparison.
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For illustration purposes only. Past performance is not an indication of future performance.
R-Squared
Source: Investopedia.com
Indicates the usefulness of Beta score
Range: 0-100%
>85% performs like index
<70% performs unlike index
For illustration purposes only. Past performance is not an indication of future performance.
Beta
Source: Investopedia.com
Volatility compared to the market
1 = as volatile as the market
<1 = less volatile than market
1< = more volatile than market
Example = Beta of 1.02 means
2% more volatile than the market
For illustration purposes only. Past performance is not an indication of future performance.
Alpha
Source: Investopedia.com
Value a manager adds or subtracts
The more positive the better
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For illustration purposes only. Past performance is not an indication of future performance.
Performance
For illustration purposes only. Past performance is not an indication of future performance.
Performance
Presented net of feesAverage annualized
For illustration purposes only. Past performance is not an indication of future performance.
What We Covered Today
What a mutual fund is
How mutual funds are different
How to evaluate mutual funds
Morningstar.com
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For illustration purposes only. Past performance is not an indication of future performance.
MoneyAdvice@Work®
Call 866-232-6457 or visit moneyadviceatwork.com
to schedule a personal MoneyAdvice session.
@francisinv
Francis Investment Counsel does not provide legal or tax advice. As investment returns are variable, we cannot guarantee any certain investment return or result. Historical performance information has been compiled from sources we believe to be reliable, but we cannot guarantee its accuracy or completeness. Past performance is not a guarantee of future results.
For illustration purposes only. Past performance is not an indication of future performance.
Moneyadviceatwork.com/learnmore
For illustration purposes only. Past performance is not an indication of future performance.
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