Choosing funds

Each day, we come across numerous fund/unit trust advertisements in the various print medium. It can get quite intimidating. What to look out for? Fortunately, there are a few pointers serious investors should take note of when searching for the next high performing fund.

1) Look for funds in operation for more than 5 years.
A fund should have been around long enough to invest in both good and bad markets. The longer the track record the better.

2) A long management tenure.
The manager should have a long track record at the same fund so that we are able to gauge his performance over time.

3) Low management fees (<1.5%).
Avoid funds with front- or back-end loads -- additional fees charged every time you buy or sell a share. Also we do not want to pay more for mediocre returns.

4) Relatively low fund turnover.
We want the manager to be investing, not trading. But remember, small-cap funds typically have higher turnover than large-cap funds.

5) Is the fund following its investment objective?
Check out the fund's top holdings. Are they consistent with its stated objective?

6) Check the fund's ability to beat the benchmark.
Again, that's the main reason why we put money in funds. Isnt it?
So as to achieve a better than average return.

7) Ideally the manager should also have a stake in the fund.
You would like them to eat their own cooking too, dont you?