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What’s Inside

PresentSo there’s some folks in my life who always ask me, “What stocks are in that mutual fund you’re talking about?” I remember asking this question myself a long time ago when I didn’t know what the heck mutual funds were. When you first understand what mutual funds are sometimes there’s a feeling of “gee, I own a piece of this stock and a piece of that stock. ” Which is true but the mistake is when people choose mutual funds based on that reason.

That isn’t the best way to choose mutual funds. The moment you find out what’s inside a mutual fund or what stocks are held within the mutual fund, the fund manager could have already sold them.

An analogy would be if you were deciding to buy a baseball team and you asked, “What color are the uniforms?” Implying that if the color of the uniforms are pleasing to me, then I’ll buy the baseball team and everything will be good. Ok, kind of a goofy analogy.

The analogy you want to use is, what if you were buying a baseball team and you had a great batter like Sammy Sosa and great pitcher like Randy Johnson on the team. If these folks were on your team, then the odds of you having a pretty good season go way up.

Well, the same thing applies to mutual funds. The question is, “who is the manager of the fund and what’s his or her track record?” That’s how you should be thinking when reviewing mutual funds.

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