Evaluating Mutual Funds

June 21, 2019
Evaluating Mutual Funds

Before choosing funds for your portfolios, understand the different types of mutual funds and evaluate which ones can best help meet your goals.

Sometimes, trying to select a grocery product from the many offerings available can seem bewildering. But you can focus your decision-making by weighing the advantages and disadvantages of the options. This same approach can also apply to selecting mutual funds for your investment portfolio.

Finding a Good Fit

The mutual funds you choose for your portfolio should be well matched with your investing goals, risk tolerance, and investment time frame. If you have short-term goals or a low risk tolerance, you may want to consider a fund with a conservative investment strategy. Funds with a more aggressive focus and the potential for long-term growth may be a better fit for those investing for the long term and with a higher risk tolerance.

Active or Passive

Consider whether a fund is actively or passively managed. Actively managed funds attempt to outperform the market by relying on the fund manager’s skill in buying and selling securities at favorable prices. An active fund manager’s expertise, experience, and past performance should be taken into consideration when evaluating these funds.

Index (or passively managed) funds invest primarily in all or most of the securities that make up a particular market index, with the goal of imitating the index’s return. As a result of less frequent trading, index funds generally have lower costs than actively managed funds.

It’s All Relative

When selecting a fund, you’ll want to know how well it’s performing. Although past performance does not guarantee future results, it’s helpful to compare a fund’s returns with an appropriate benchmark index. And once it’s part of your portfolio, knowing how your fund is doing compared to similar funds can help you determine whether changes may be necessary to reach your goals. It’s not unusual to vary over time, but you might want to reconsider a fund that consistently performs below its benchmark.

Keep Track of Changes

A fund’s strategy may change when a new manager is appointed. As a result, the fund may no longer be aligned with your original reasons for purchasing it. It’s also possible your own goals, risk tolerance, and time frame have changed. Detailing the reasons why you’ve purchased a fund may help your decision-making when you’re evaluating performance. You may want to occasionally check with a financial professional to confirm that your fund’s objectives fit your portfolio.

For more information, consult a professional who specializes in managing investment products. You can also visit popular.com/401k, where you’ll find a number of investment options.



Consider the fund’s investment objectives, charges, expenses, and risks carefully before investing. The fund’s prospectus, which can be obtained from your financial representative, contains this and other information. Read the prospectus carefully before you invest or send money. Shares, when redeemed, may be worth more or less than their original cost.

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The information and general descriptions contained in this article are designed to help you understand about the factors that you should generally consider when evaluating the appropriateness to your retirement plan of any strategy or investment. Any descriptions herein are solely for informational and educational purposes and for your independent consideration; they are not intended to be regarded or construed as advice or a suggestion for you to take (or refrain from taking) a particular course of action. In providing this information, we assume that you are capable of evaluating the information and general descriptions contained herein and exercising your independent judgment. This document was prepared for informational purposes only and should not be considered as an advice of any kind. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting, or tax advice. Should legal, accounting, or tax advice be required, the services of a competent professional should be sought. Investment products are not insured by the FDIC, are not deposits or obligations of and are not guaranteed by Banco Popular de Puerto Rico or its subsidiaries or affiliates, and may lose value. Insurance products are not insured by the FDIC or other government agencies, are not deposits or obligations, and are not guaranteed by the Bank or its subsidiaries or affiliates. Some insurance products may lose value.