Welcome to Better Have My Money, my Monday night newsletter about stocks, investing and money emotions.
Lovely reader Charlotte wrote in recently with a dilemma:
This is a silly question, but I am trying to be shame free. I have owned shares in a mutual fund that my Dad chose for me about 15 years ago. He died six years ago, and ever since then I have hung on to them, knowing that I should probably evaluate whether this is a good investment still but not quite sure how (I think a mutual fund is a good idea generally, but I am not sure whether this particular one is doing well). While I have reinvested the dividends, they're so minimal that it's pretty irrelevant --- the issue is the value of the shares. This is so basic, but can you talk me through how to tell how it's doing? And how do I find information about how competitors have done over the same period? How far back should I go to try to judge how it's doing now?
So first of all, shout out to Charlotte’s dad for looking after his girl and getting her into low-risk long-term investing.
Second, this isn’t a silly question at all, because it can be hard to check how an individual investment is going, particularly when the entire market has also been up the last few years.
Did your fund grow because it was put together safely and ready to withstand market fluctuations or did it just rise cause someone bought a lot of Shopify (SHOP) stock which jumped 1189% in the last five years (that is genuinely how much it has increased) and everything else in it is pretty dodgy?
So basically there’s a few different ways to evaluate how the fund is going and if it’s one you want to keep your money in.
To start, look up your fund on Morningstar.
Morningstar is a Chicago-based news site where investors can evaluate how successful a mutual fund or ETF is. You can sign up for a free trial and see all their info and ratings on specific funds, which can help you evaluate your current fund and/or help you try and pick a new one.
Basically, you can just type in the name of your fund and read its report card.
Is it a high-risk growth fund or a super diversified slow-and-steady fund? Are its expenses high or low? How much is the historical growth in the last 3/5/10 years and how does it compare to other similar funds? This comparison to other similar funds is probably one of the most helpful things, cause you want to make sure you’re comparing low-cap funds to low-cap funds or whatever your fruit is.
Then, check how much are the fees? Mutual funds are often active funds, rather than passive funds like an index fund which just follows the market, meaning that one or many portfolio managers need to be paid for their work, and they are paid in part via your fees.
Confusing term of the day: “portfolio manager” — the person who manages a mutual fund and chooses the stocks and asset allocation, buying and selling as needed.
You want fees of an active fund to be less than 0.8%. Higher fees do not equal better performance, and literally just take your compound interest from you.
Go back at least five years and check out the historical performance. The last year has been particularly tough, so check out how the fund has been holding up.
Since you’ve had it 15 years, I’d go back the entire 15 and compare it to as many competitors as you can — and compare it to the S&P 500 growth over the same time period.
And then let us know what you find! Either way, I suspect this fund has been good to you over the last 15 years (mutual funds are built as long-term investments), even with the 2009 recession in the middle and some ups and downs, so shout out to your dad.
Last week I spoke about doing one tiny dumb annoying money chore (although… to be completely honest, I soon learned that you cannot in fact cash a 10-month old check and I had to call my health insurance company, spend 20 mins getting through to a real person and get three checks reissued, but hey I guess I did one medium sized dumb chore so applause for me).
But you guys did such amazing money chores!!!! Here’s a little taster of some of the emails I got this week:
Sebastian: “I did my own dumb money chore this weekend and finally signed up to get my Vanguard statements online so I don't have to pay a $20 yearly service fee. Only took me two years to do it!”
Madeline: “The dumb money chore I dealt with was consolidating my retirement funds! I… proceeded to make like six calls to my old retirement plan company, my new one, and my new HR rep, all of which required no time on hold because everyone had just opened for the day and, well, no one else is making calls at 8 am on a Wednesday. I filled out four forms, stuck them in the mail and should get about $2.3k of old money rolled into my new fund.”
Emma: “I went and turned off the credit freezes on the three credit monitoring services so that I can apply for a new credit card for airline miles!”
Sarah: “Today I made about 15 calls to figure out why my insurance company thinks I'm no longer insured.”
Kate: “Finally opened my Barclays high yield savings account.”
Will: “Just increased my regular bank transfer before of you.”
Making me feel very proud and satisfied, thank you.
And just cause they are charming and make me smile today, may I suggest a donation to the Lemur Conservation Network this week.
Have a fund week,
Better Have My Money is on Twitter @bhavemymoney, so please tweet nice things (aka the link to our sign up page) and tag us. Got a mate who also likes having funds? Forward this onto them and tell them to subscribe. If you sign up to Acorns, use my sign up code to join and we both get $5.
As always, if you've got any questions about stocks, this is a shame free zone. Just reply and ask away.