This report identifies the “best” ETFs and mutual funds based on the quality of their holdings and their costs.
Fund holdings affect fund performance more than fees or past performance. A cheap fund is not necessarily a good fund. Investors are good at picking cheap funds. We want them to be better at picking funds with good stocks. Both are required to maximize success.
This report focuses on my top picks and pans for all sector funds. I will follow this summary with a detailed report on each sector.
Investors are good at picking funds with low costs. They are not good at picking funds with good stocks. Both are required to maximize opportunity for success.
David A. Geracioti, Editor-In-Chief of Registered Rep magazine, recently invited me for an interview on why economic earnings matter when selecting stocks, mutual funds and ETFs.
QUESTION: Why should fund investors rely on backward-looking NAV trends?
ANSWER: They should not.
The radically higher number of US equity mutual funds (4,700+) versus ETFs (380+) is not indicative of better stock selection from active management. On the contrary, the vast majority of actively-managed funds do not justify the higher fees they charge. They do not, in terms of stock selection and expected returns, add value versus passively managed benchmarks.