Politics & Policy

Is Infidelity For You?

When picking mutual funds, don't be fooled by the ratings.

There are a number of mutual-fund advertisements appearing in newspapers and magazines today that look something like the following (although there won’t be the same emphasis on poor performance):

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INFIDELITY FUNDS FOR YOUR IRA

Put our years of inexperience to work for you! Our average fund manager tenure is 3.2 years. If you are planning for retirement and you are now 25, you can look forward to having more than 12 portfolio managers taking care of your investments over that time period.

Investing is a long-term proposition. Our annual portfolio turnover is 100%. So, over the next 40 years, you can look forward to your portfolio turning over 4000%! We will work hard at continually building your portfolio using our active management techniques.

According to Eveningstar, a not-well-known fund measurement firm, we have the ability to build lowly rated funds like the following:

FUND OVERALL MOONRATING
Infidelity Aggressive Growth

Infidelity Select Energy Service

Infidelity Select Automotive

Infidelity Select Biotech

Infidelity Spartan Extended Market Index

O

O

O

O

O

Since we have built these lowly rated funds through hard work, diligence, and above all management supervision, we can offer you the opportunity to construct a retirement portfolio that could benefit from these interesting funds. Whether rolling over an IRA, consolidating, or simply making an annual contribution, thousands of investors like you have relied on Infidelity’s inexperienced money managers to minimize the chances of reaching your retirement goals. And we’ll build on this heritage for years to come. So invest — and maybe retire — with us. [Unfortunately, we don’t have any openings at this time.]

Note: Past performance is no guarantee of future losses. Overall Eveningstar ratings are as of 12/31/02.

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In today’s mutual fund business, what’s hot is what sells. And last year’s winners are hot even though their chances of being winners for you are just about random. (Don’t confuse mutual fund staying power with Motor Trend’s top car picks.) So, when choosing mutual funds for different investment goals, be careful about buying last year’s winners — or for that matter any winners that garner the attention of the rating agencies. Instead, take a closer look at such things as portfolio turnover, manager turnover/tenure, expense ratios, and consistency of investment style. These are the factors that will matter most in the long run.

Tom Nugent is Executive Vice President & Chief Investment Officer of PlanMember Advisors, Inc., and an investment consultant for Wealth Management Services of South Carolina.

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