Monitoring the Fundamentals of Your Portfolio's Funds
Just as you should watch for unexpected changes in your portfolio, you should watch for changes in your funds, too. Investors who carefully chose their funds will likely want them to meet the same investment criteria today as they did when they bought them. You should ask yourself, “If funds no longer meet the same criteria, do they still belong in my portfolio?”
It may be, however, that just because a fund no longer meets one or two of your original criteria, you don't see that as a sufficient reason to sell. But if a fund no longer clears most of your investment criteria hurdles, it may become a sell candidate.
For example, perhaps you purchased a fund five years ago to fill a small-growth role in your portfolio. You wanted a fund with a Morningstar Rating of at least 4 stars, a total return category rank in the top third of its peer group over the three- and five-year periods, no more than 40% of its assets in technology, and an asset size of less than $300 million.
If today, however, that same fund lands squarely in the mid-cap growth slot of the style box, its Morningstar Rating has slipped to 3 stars, its category rank has fallen to the bottom half of its group, it has 60% of its assets in technology and its asset size tops $1 billion, you're investing in a fundamentally different fund than you once were. This fund no longer meets your criteria.
Read Next: Monitoring Performance
Investors should consider the investment objectives, charges, expense, and unique risk profile of an Exchange Traded Fund (ETF) or mutual fund carefully before investing. A prospectus contains this and other information and should be read carefully before investing. A mutual fund prospectus is available through www.scottrade.com or through a Scottrade branch office. An ETF prospectus must be obtained from the issuer.