An investor in a mutual fund is driven by the same considerations as all investors in stocks and bonds. He wants to achieve the highest possible return on his investment by investing in a fund that has an acceptable amount of risk. The past performance of a mutual fund is a useful piece of information for evaluating the performance, variability and risk level of a potential investment. You can use a variety of online screening tools to identify funds with the highest consistent historical returns.
A mutual fund is an investment vehicle that pools investor funds to buy a select collection of stocks or other securities. A mutual fund may focus on a particular investment strategy, such as investing in blue chip stocks that are components of the Dow Jones Industrial Index. Other funds may focus on a particular sector, such as technology or consumer goods, or a particular region, such as stocks from China or Latin America. Some funds specialize in companies of a specific size, such as mid-cap or small-cap funds. A mutual fund, like any investment, can result in a gain or a loss over time as the value of the fund changes. Some funds are highly variable in their year-to-year performance, while other funds are more consistent.
The value of a share of a mutual fund changes according to the values of the underlying stocks. Investors often examine a fund's price history and consistency to better understand its performance over time. Some funds provide fairly consistent performance from month to month and year to year, producing a steady record of mostly positive results. Other funds are more variable, with a history of sharp changes in value that produce losses as well gains. Investors generally opt for consistent funds when reliability is an important consideration, but may choose funds with a more variable history if they believe the opportunity is greater to achieve higher overall returns.
A number of online financial sites, such as Yahoo! Finance and the New York Times business pages, offer mutual fund screeners. You can use these tools to generate a list of mutual funds according to criteria you select. For example, you can choose funds with the highest short-term or long-term returns, no-load funds that charge only minimal fees, funds with high ratings, and funds capitalized above a selected size.
Ten Year Performance
The New York Times business pages screener provides 10-year performance records for mutual funds, an indicator of consistency over a long period. In February 2012, six highly-rated funds had 10-year total returns of 15 percent or more per year, on average. The funds were Virtus Emerging Market Opportunities, Invesco Developing Markets C, Invesco Developing Markets B, Henderson European Focus A, Vanguard Energy Adm, and Vanguard Energy Inv.
Three Year Performance
For consistency over the shorter term, three top-rated funds produced average returns of more than 33 percent a year. The funds were Causeway Emerging Markets Institutional, Marsico Flexible Capital and Causeway Emerging Markets Investor.
Multiple Criteria Performance
Some stock screeners can combine performance histories to produce a list of funds that consistently appear in the top tier of short-term, medium-term and longer-term performance. The New York Times screener produced a list of 29 highly rated funds that were in the top 20 percent of performers over the course of one year, three years, five years and 10 years. For example, the Artisan Mid Cap Institutional fund had the following returns as of February 2012: 1-year, 7.5 percent; 3 years, 31.19 percent; 5 years, 7.57 percent and 10 years, 7.97 percent.
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