How to Rate Investment Companies
If you own a financial portfolio, you probably had to deal with an investment company. Since, an investment company usually handles mutual fund operation and has many responsibilities governing the way a mutual fund is taken care of. These companies receive their funding from investor and can be publicly or privately held.
- Understand that the performance of your mutual fund depends largely on the investment company operation, and how well it is run. Compare your investment company fund to others in the same category that has the same purpose as yours as well as size, investing style and assets owned. It is critical that you use these criteria as your measurement for the performance of the investment company fund rather than using any other strategy.
- Examine the management discussion operation of the company by reviewing the Security and Exchange Commission (SEC) filing of the investment company. When you do this, check to see if the company has any lawsuits, regulatory action, negative legal feedback about operations of the fund. Consider any regulatory action a signal that the company has poor management and do not use this company or its funds. Pause if you notice that the company has compliance failure because this often means tax management issues.
- Understand that your portfolio manager and investment company directly controls your expense ratios as well as your portfolio turnover ratios and analyze them carefully. If you have a large fund, expect smaller expense ratio using a per asset basis. The expense ratio you have to pay and the investment performance and return directly affect your expenses.
- Check the rating of the investment funds at companies such as Morningstar, Yahoo and MSN and use the financial dailies and weeklies to measure performance of your funds. Good performance listing at any of these companies mean the investment companies will receive more investors, and this could stabilize existing investors. Look for management companies that run money funds along with a large bond portfolio because they provide more stability than others and worth more.