Is a 10% annual return on a mutual fund a great investment?

Question

My financial adviser recently suggest a fund that annually returns 10% It has a morning star rating of 5 stars and has a good overall look do you think that I should invest in the fund. What is another good investment and I don't touch forex trading

Answer 1

Sounds Ok but like of course markets can change.

Answer 2

If you read the fine print on any mutual fund prospectus, you will find there that "previous performance is not a guarantee for future results" or something that sounds like that.

Did your financial advisor disclose that they are going to get commissions if you bought into this 10% mutual fund investment? Some CFA's who charge upfront fees will still get commissions from the mutual funds or other investments that they sell. In some investments that these CFA's sell, they get ongoing commissions, year after year. Now who pays for these--the mutual fund, or you? You should be clear about this with them to rule out possible conflict of interest.

10% is pretty average (lame, IMO) return for a mutual fund. You need to ask if, considering the recent stock market situation, if this 10% return still exists. Some mutual funds do not update their funds' performance until after a given period of time.

You mentioned that Morning star rated this fund as 5 stars and has good overall outlook. What does this mean? Good overall outlook based on what? compared to what? Compared to a standard benchmark, how did the fund perform? Factoring in all fees that you, the investor will incur, what will be your expected returns?

What type of investments does the fund invest in? There are several fixed income securities that you can invest that pays 10%.

If you were to invest like everyone else, then the returns you will get will not fare better than every one else.

Good luck!

Answer 3

The 5 star rating is always a good thing.  Ten percent annually is very good, but there is no guarantee that is going to continue.  The important thing is does this fund fit your risk profile and the rest of your portfolio.  And does it have low fees.

Answer 4

Maybe.  Never trust returns on mutual funds.  Nobody can see the future, and mutual funds are notorious for covering up the past.

For instance a mutual company has two mutual funds.  One is off 30% from the previous year and one is up 10%.  The mutual fund can merge the losing fund into the winning fund and claim their mutual fund is up 10% on all thir advertising.  That losing mutual fund just vanishes from all their paperwork as if it never existed.

Answer 5

what's the time frame?   regardless, 10% is definitely a solid annual return for a mutual fund.  Morningstar is THE authority on mutual fund ratings, so a five star rating is a good sign, although ratings are mostly statements regarding the past, and it's the future that matters.  still, a high morningstar rating is something to conside.

as far as other investments....it depends on yhour investment constraints, but int theh LT, stocks and real estate bring 10+% returns.  althugh this number willlikley derease in the future.