When you have a good understanding of key statistics and know how to use them effectively, comparing mutual funds is fairly straightforward. The key statistics listed below should be comparable to mutual funds.
For a long time, you will have a good feeling for the fund's ability to continue to provide good returns. MM mutual fund return
- Arithmetic mean
- Risk adjusted return
Mutual fund risk
- standard deviation
- Beta version
Risk versus return
- Sharpe ratio
- Coefficient of variation
- Treynor ratio
You can do it at Yahoo!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! These key statistics should be used in the order listed.
Risks and returns should not be used separately to compare mutual funds. In fact, you need to use one of the risk rewards to compare mutual funds with each other.
Published annual returns are usually calculated by compound monthly returns, which are usually calculated as the geometric mean of annual returns, which produces a compound return and is a measure of whether you have invested in the fund. The period of interest. However, the arithmetic mean, a simple average of the annual mean, is an appropriate indicator of the ability of a mutual fund to provide good returns. The return on delivery at different times will give you a good feel for the ability of the fund to continue to provide good returns. Should give more weight for a longer period of time.
The return published by an independent source should be the total return [including dividend and capital gains allocation], net of expenses and expenses. Be sure to verify this.
In investment, risk is measured by volatility. The total risk is measured by the standard deviation of returns, which is used to compare the standard deviation of mutual funds. Beta is an indicator of residual risk, the risk inherent in the overall market. Beta refers to the volatility of securities relative to generalized market indices [such as the S&P 500 Index].
Although we have a natural aversion to risk, the risk is that there is reason to get more than the return of non-voting securities [such as Treasury bills], but the expected return must be commensurate with the level of risk. If two mutual funds have the same return but one has a significantly higher standard deviation, then the one with the higher standard deviation should return and benefit the other. On the other hand, if two mutual funds have the same risk-adjusted returns, if you have high risk tolerance, you may prefer the higher risk of both because it is likely to bring higher returns.
The risk-adjusted rate of return is calculated by dividing the fund's rate of return by its standard deviation and multiplying by the standard deviation of the relevant index. For example, if you are comparing emerging market equity mutual funds, the appropriate index will be the emerging market stock index. Using the relevant index instead of the S&P 500 is not absolutely necessary, but it has the advantage of giving you the opportunity to compare the various funds to the index. If the funds you are comparing do not exceed the index on a risk-adjusted basis, then you should check out some other funds or purchase indices.
The final quantitative step in comparing mutual funds is to use some risk-reward. Here, the Sharpe ratio is the uncompromising winner of comparing mutual funds because it is calculated using total risk. The coefficient of variation is a fast and dirty alternative to the Sharpe ratio. The Treynor ratio monitors the degree of diversification of its calculations and is best suited for assessing the ability of funds. manager.
The Sharpe ratio is the excess return [actual income minus the risk-free rate] divided by the standard deviation. The result is the actual return per unit of risk. When comparing similar mutual funds, the fund with the highest Sharpe ratio should always be preferred. If you show a lower degree of correlation with other securities in your portfolio, then choosing the one with a slightly lower Sharpe ratio may be appropriate.
The revenue and expense ratios themselves won't tell you a lot, but they should be included in the return and you should verify that they exist. If one of your goals is to generate a source of income, then yield is a factor. In addition, in taxable accounts, the rate of return generates a tax liability.
The turnover will affect the return on the transaction cost return, but it will always be reflected in the return. In tax deferral accounts, the turnover of the payment method is not an issue. Turnover is a problem in taxable accounts because it generates capital gains tax liabilities.
Finally, managerial tenure should always be a consideration when evaluating and comparing mutual funds other than index funds. A mutual fund with a good long-term record under the same manager is highly desirable, and there should be a co-manager or a fully instilled disciple to continue in the absence of the manager.
Always compare apples and apples. If you compare mutual funds in the same asset class, they are similar in size and managed by the same style, your comparison will be most effective. For example, don't compare large, large growth funds with small, small funds.
If you use these key statistics effectively to compare mutual funds, you should be very satisfied with most of the choices. But nothing is positive about investment, so be prepared for occasional departure.
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