In the vast investment market of more than 9,000 mutual funds, how can top mutual fund performers be identified? Mutual funds that give shareholders large dividends (income/capital gains) are one category to pursue. Funds that maintain performance growth are another. But how are these mutual funds found?
A good solution is to screen the mutual fund universe and select funds having the best track record of distributing large income/capital gains. At this point, funds that maintain long-term performance growth have to be identified. There still would be other considerations such as investment classification, fees, expense ratio, initial purchase, IRA purchase, risk, etc. to add in the process.
Mutual Funds Earn Income and Capital Gains
The dividends and interest earned by a fund on its investment is the fund’s income. Many of these equity mutual funds distribute income quarterly. A fund selling an investment security for a higher price than originally paid, has a gain. A fund selling an investment security for a lower price than originally paid, has a loss. If the investment security is held by the mutual fund for more than one year, the gain or loss will be a long-term capital gain or loss. If the investment security is held by the fund for less than one year, the gain or loss will be a short-term capital gain. Mutual funds gains and losses are netted together and when the fund has a net gain, that gain is usually distributed to the shareholder once a year.
Net Asset Value (nav)
The net asset value is the current market value of the mutual fund’s holdings (stocks/bonds) per share. The market value of a fund is also referred to as share price. A mutual fund’s nav/share price is reduced by the amount of distribution.
Performance
The Performance of mutual funds is based on the daily net asset value change. When the change is more or less than the value of the nav, the percent of performance is a gain or loss. Total return of a mutual fund includes the distribution, if any, and the performance.
Mutual Funds Model
Mutual Interest Data Service (www.largedividends.com) screens and analyzes thousands of mutual funds every year that distribute large income/capital gains. A data base of more than 900 mutual funds is established on the est five year Total Returns.
On September 15, 2006 $10,000 was hypothetically invested between 4 mutual funds from the MIDS’ data bank. The objective for these mutual funds is: 1) achieve performance growth, 2) increase the shares owned, 3) minimize the risk, and 4) maintain a comfortable lifestyle in all market conditions.
· Balanced $2,000.00 (114.92 shares @ $17.36 nav)
· Equity Income $2,500.00 (89.22 shares @ $28.02 nav)
· Multi Cap Core $2,500.00 (139.60shares @ $16.82 nav)
· Specialty Health $3,000.00 (20.19shares @ $148.60 nav)
$9,843.08 (-1.56%) Actual Investment after initial Fees
As of March 22, 2007, the current shares owned and the net asset value the mutual funds are:
· Balanced $2,140.39 (118.45 shares @ $18.07 nav)
· Equity Income $2,785.29 (92.32 shares @ $30.17 nav)
· Multi Cap Core $2,660.68 (152.30 shares @ $17.47 nav)
· Specialty Health $3,135.27 (21.20 shares @ $147.89 nav)
the Total Return on these funds is $10,721.63 +7.21%. If distribution was not received and reinvested, the Total Return would be $10,178.51 +1.79%
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