Fund selection matters! Having the ability to select the mutual funds that are top performers in each category in the market is paramount to good portfolio management. The difference between a bottom quartile mutual fund and a top quartile mutual fund can be very significant considering that no additional risk may be taken on.
Next time you sit down and have a conversation with your planner, make sure that they have the ability to select mutual funds that are top in their categories. Ask them to share this information with you. How is your mutual fund performing in comparison to its closest brothers and sisters? This is a simple benchmark that will give you an indication of how it’s performing in its category. If you need an independent opinion on where your mutual funds stand, go to Morningstar.com, type in your mutual fund’s name, and take a look at what the analysis says about the fund that you currently have.
Also, as a rule of thumb, it’s rare for any one mutual fund company to be good in all categories. If your portfolio is concentrated in one mutual fund company, you may want to get a second opinion and decide if your advisor has your best interests in mind when selecting these particular funds.