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Plan Well, Retire Well

Saving and investing your money

Another way to evaluate your mutual fund: Stewardship grades


What do you look for in a mutual fund? An investment objective that matches your goals? Historical returns? Tenure of the manager? Indexing versus active management? Cost? Those are all good things. But here's another to add to your list: how well a mutual fund treats its investors.

According to a recent study, funds that treat shareholders well may also do well for them financially.

Morningstar, the 600-pound gorilla in mutual fund research, has long been the go-to place for mutual fund data. In a report released in March, they conclude that funds who rate well on their "stewardship" are more likely to 1) stay in business and 2) provide "competitive" returns. Many funds who ranked low in the stewardship scale disappear, either through merger with another fund or liquidation. And both of those are signals that the fund was not doing well.

What does Morningstar mean by stewardship? According to the report, there are five components: "(1) the corporate culture of the fund's parent organization; (2) the quality of the board of directors overseeing the fund; (3) the fund managers' financial incentives; (4) the fund's fees; and (5) the fund firm's regulatory history."

No one is arguing that "stewardship" should be the prime factor in your decision. But isn't it nice to hear about a situation where the do-gooders come out ahead?



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Mutual fund has big craze in all countaries.No everyone make money through mutual fund.but you provide nice information about mutual fund.
by Australian SEO Company Australian SEO Company on Thursday 5/26/2011

Thank you for your comments. It's true that everyone doesn't make money with mutual funds -- whether investing in stock or bond or a different kind of mutual fund, there is always the risk of losing value as well as the potential to gain. Mutual funds do help diversify our investments.
by Kathy Sweedler on Wednesday 6/1/2011