Don't Chase Last Year's Mutual Fund Category Winners

Submitted by Edward JonesPrint Story | Email Story

The world of mutual funds can be confusing. With more than 9,000 funds on the market, how can you choose the ones that are right for you?

One way to start is by considering the various categories of mutual funds – and there are quite a few of them: Small Cap Growth, Large Cap Growth, Large Cap Value, Diversified Emerging Markets, Foreign Large Cap Blend and more – the list is extensive, and for many people, confusing.

However, with a little study, you can understand why these funds have their names – for example, a Small Cap Growth fund will contain stocks of smaller companies thought to offer growth potential. Once you know the goals of different categories of mutual funds, you can determine which ones fit into your overall investment strategy.

This is important, because you want to ensure your portfolio is appropriately diversified. For example, if you find that almost all of your mutual funds come from the above-mentioned Small Cap Growth category, you may be taking on more investment risk than you would like, because funds that offer the greatest growth possibilities also usually carry the highest degree of market volatility. Typically, you may be better off owning an array of mutual funds drawn from several different categories, with the percentage each category occupies in your portfolio based on your goals, risk tolerance and time horizon. (Keep in mind, though, that while diversification can help reduce the effects of volatility, it doesn't guarantee a profit or protect against losses in a declining market.)

You might be tempted to choose categories by looking at which most recently outperformed the others, and just stick with those groups. But is this a good idea?



It probably isn't – and the main reason you shouldn't chase performance this way is things change very quickly in the mutual funds arena. It’s quite possible – and has happened many times – that the top category last year can fall into one of the worst-performing ones this year, and vice versa. Consequently, your efforts to capture a winning trend may be futile.

Of course, within the context of investing in various mutual fund categories, you still need to choose individual funds. And, as is the case with categories, you might be tempted to give considerable weight to a fund’s track record. But, similar to the situation with fund categories, "chasing performance" is typically not a good strategy – after all, last year's "hot" fund may have cooled off considerably this year. Nonetheless, reviewing a fund's longer-term track record can help you understand how it might perform through the ups and downs of the financial markets. Always keep in mind, though, that past performance can’t guarantee how the fund will perform in the future.

Mutual funds are popular investments – and for good reason. Since each fund generally contains dozens of securities, you get a degree of diversification you can't achieve from owning individual stocks or bonds. And, as discussed above, you can diversify further by owning funds from several categories. Just remember, though, that as you build your mutual fund portfolio, don’t get caught up in last year’s results – because old news just may not be that relevant today.

Mutual fund investing involves risk. Your principal and investment return in a mutual fund will fluctuate in value. Your investment, when redeemed, may be worth more or less than the original cost.

This article was written by Edward Jones for use by your local Edward Jones financial advisor. Courtesy of Rob Adams, 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information, see EdwardJones.com.

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North Adams Happenings: Aug. 21-27

SAVE THE DATE
AUGUST 29th - DownStreet Art
DownStreet Art, the last-Thursday-of-the-month popup program of Massachusetts College of Liberal Arts’ Berkshire Cultural Resource Center (MCLA BCRC), returns to downtown North Adams from 5-8 p.m. on August 29, 2019. As always, DownStreet Art is free and open to the public.
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AUGUST 30th - Starry Night Movies at UNO Park Presents: Hidden Figures
On August 30th, we are showing Hidden Figures. The story of "three brilliant African-American women at NASA who serve as the brains behind one of the greatest operations in history: the launch of astronaut John Glenn into orbit, a stunning achievement that restored the nation's confidence, turned around the Space Race and galvanized the world" (Google).
The festivities start at 6pm. More information on activities and games coming soon. Movie will begin at 8:00pm. Bring pillows, blankets, and low back chairs to take in this incredible untold story under a starry night on the UNO Park lawn.
More information.
 
Wednesday 8/21
9:00 A.M. (FREE), SOCIAL, Open Hours UNO Community Center, 157 River Street, (413) 664-4612 More information.

10:00 A.M. (FREE), KIDS, Terrific Tots Playgroup The Family Center, 210 State Street, (413) 664-4821 More information.  

10:30 A.M. (FREE), KIDS, Preschool Story Time North Adams Public Library, 74 Church Street, (413) 662-3133 More information. 


11:30 A.M. (FREE), KIDS, Little Wonders Baby Playgroup The Family Center, 210 State Street, (413) 664-4821 More information. 

5:00 P.M. (FREE), WORKSHOP, Simple Zero-Waste Swaps for the Bathroom: A Zero-Waste Workshop UNO Community Center, 157 River Street, (413) 664-4612 More information.

6:30 P.M. (FREE), MUSIC, Concerts at WIndsor Lake Presents JP Murphy 200 Windsor Lake Drive, (413)664-6180 More information.

8:00 P.M. (FREE), GAMES, Trivia Night! Ramunto's, 67 Main Street, (413) 398-5152 More information.

Thursday 8/22
9:00 A.M. (FREE), SOCIAL, Open Hours UNO Community Center, 157 River Street, (413) 664-4612 More information.

4:00 P.M. (FREE), TUTORING, After School Program UNO Community Center, 157 River Street, (413) 664-4612 More information.

5:30 P.M. (FREE), KIDS, North Adams Public Library Trip North Adams Public Library, 74 Church Street, (413) 662-3133 More information.

6:00 P.M. (FREE), BIKING, Downtown Bike Around Anthony's Municipal Parking Lot More information.

6:00 P.M. (FREE), MUSIC, Party in the Park Presents The Brave Brothers Noel Field, 310 State Street More information.

7:30 P.M. (FREE), BINGO, Musical Bingo at Mingo's Sports Bar and Grill 41 Roberts Drive More information.

8:00 P.M. to 11:00 P.M. (FREE), MUSIC, The Chalet: Eavesdrop The Chalet at Courtyard D, MASS MoCA, 1040 MASS MoCA Way More information.
Friday 8/23
7:30 A.M. (FREE), MEET AND GREET, Coffee Date at the NAMAzing Eagle Street Parklet NAMAzing Eagle Street Parklet More information.

10:00 A.M. (FREE), KIDS, Drop-In Playgroup The Family Center, 210 State Street, (413) 664-4821 More information.

11:00 A.M. (FREE, PARKING $5), KIDS, Kidleidoscope New England's Natural Bridge, 1 McCauley Road More information.

12:00 P.M. (FREE), SOCIAL, Open Hours UNO Community Center, 157 River Street, (413) 664-4612 More information.

7:00 P.M. (By Donation), CRAFTING, Knitting Nights with Common Folk Common Folk, 73 Main Street More information.

7:00 P.M. ($1 and up), GAMES, BINGO! North Adams Elks 487 Lodge, 100 Eagle Street, (413) 664-9039 More information.

8:00 P.M. (FREE), MOVIE, Movies Under the Stars at Colegrove Park Presents: The Goonies Colegrove Park Elementary, 24 Church Street, (413) 664-6180 More information.

8:00 P.M. ($18 - $44), MUSIC, Roomful of Teeth MASS MoCA, 1040 Mass Moca Way More information.

9:00 P.M. (FREE), MUSIC, Karaoke Friday! State Street Tavern, 167 State Street, (413) 664-9152 More information.
Saturday 8/24
9:00 A.M. to 1:00 P.M. (FREE), MARKET, North Adams Farmers Market The Wigwam Western Summit, 2350 Mohawk Trail More information.

10:00 A.M. (FREE, PARKING $5), TOUR, Natural Bridge History Tour New England's Natural Bridge, 1 McCauley Road More information.

10:00 A.M. (FREE), GARDENING, Gardening Program UNO Community Center, 157 River Street, (413) 664-4612 More information.

2:00 P.M. to 6:00 P.M. (FREE), MUSIC, Motorama Cruise-in Concert Presents Whiskey City & Live Wire Noel Field Athletic Complex, 310 State Street, (413) 664-6180 More information

8:00 P.M. ($20 - $30), CONCERT, Cha Wa MASS MoCA, 1040 Mass Moca Way More information.
Sunday 8/25
9:00 A.M. to 3:00 P.M. (FREE TO SPECTATORS, CAR REG. $15), STREET FAIR, 9th Annual Motorama Car Show Downtown North Adams, (413) 664-6180 More information.

10:00 A.M. (FREE, PARKING $5), TOUR, Natural Bridge History Tour New England's Natural Bridge, 1 McCauley Road More information.

4:00 P.M. (FREE), MUSIC, Racks and Stacks- Barbecue and Vinyl Music A-ok Berkshire Barbeque, 2601 MASS MoCA Way, (413) 398-5079 More information.
Monday 8/26
1:00 P.M. (FREE), KIDS, Crafternoons! North Adams Public Library, 74 Church Street, (413) 662-3133 More information.
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