Wednesday, July 11

Tossing the turkeys

Now that mid-year numbers are available for my portfolio, it is time to examine my holdings critically and see how they are really doing. I own 7 mutual funds in my main portfolio with a total value of $248,600 at close today.

Two are large cap Canadian Equity: $83,500
Three are small cap/mixed cap Canadian Equity: $124,400
Two are international equity: $40,700

I like to use globefund.com for it's free tools for monitoring and selecting mutual funds. It tells that 4 of the 5 Canadian Equity funds are in the top quartile for their class for year to date performance. The fifth is in the bottom quartile. Not good. But it does have a five year history of ranking in the top quartile for its class, so I'm not sure that I should dump it on a bad 6-month period. It will go on my watch list though and if it's not better by the end of the year I may take action.

The two international equity funds are frustrating though. I bought them in February for $20,000 each and as you can see they have gone nowhere. In fact, they have been down much of the time I owned them. Again, they have a track record of top quartile performance, but...

In the end, I think that I won't be making any moves at the midyear mark this year. I have identified my possible turkeys though, and come the end of the year there could be heads on the chopping block. Life is too short to own underperforming funds!

For any others who are invested in mutual funds, don't let your funds' performance surprise you. Find out how they are doing and make sure you own the best that you can. There are no guarantees, but I like the five star ratings at Globefund for helping to narrow down the field after you have picked an asset class.

8 comments:

Anonymous said...

Hi there, personally I'm not a big fan of mutual funds because of the high costs however you have to go long term on whatever you invest in. Six months is not enough to pass judgement on. The reason the non-Canadian funds haven't done well is because the Cdn dollar has gone up so much this year - it has nothing to do with the performance of the mutual fund itself.

Also - I know you didn't ask for a critique of your portfolio but you have a very high percentage of Canadian equity - you should consider diversifying into other markets.

Mike

Anonymous said...

They say it's the wrong way to choose "last year's top performers" when it comes to the funds. Past performance is not a predictor of future performance.

Besides GlobeFunds advice (which I think is mostly automated, is it not?) do you do some kind of other research into the funds, such as checking up on management and fund composition?

Warren said...

I'm no mutual fund expert: but pay attention to the fund managers, not the particular funds. Good managers sometimes move around, and it can pay big to follow them.

Anonymous said...

I'm with four pillars on this....i would consider investing more outside of Canada....does anyone remember 2003? the TSX was at 6,859.80 in May.....it has more than doubled....

Anonymous said...

Looking at or flipping on short term performance is not how to use Mutual Funds.

Look at stocks if you want to play this game.

mOOm said...

Yes, you need to look at a long track record to decide if a manager is good or bad or other factors - like do they invest in the fund themselves etc. size of fund, etc. The question is whether the manager generates "alpha" - a risk adjusted excess return in the long-run.

Anonymous said...

Following up on fourpillars - I'm of the opinion that mutual funds with portfolios over $100,000 are worth revisiting. I have a post on it on my blog if you are interested: http://www.wheredoesallmymoneygo.com/mainpage/2007/7/28/mutual-funds-great-for-portfolios-up-to-100000.html

Another post that addresses diversification when getting out of mutual funds:http://www.wheredoesallmymoneygo.com/mainpage/2007/7/26/risk-systematic-risk-vs-non-systematic-risk.html

I really like your blog by the way - easy to navigate and great content.

Anonymous said...

past performance is not a reliable indicator of future results. Its almost a cliche and even mutual fund adds often show that disclaimer.

I largely agree with much of the other comments except for the advice to diversify out of Canadian holdings. If the Canadian dollar is going up relative to other currencies why would you put your money outside of Canada?