How should you make mutual fund performance analysis?

You should not solely rely on performance rating by third party websites and mutual fund returns for the last year to assess the best possible mutual fund for you. This is because performance keep changing every year. The top performers of today may not be on the list next year. When making a mutual fund comparison, there are specific performance indicators that you need to look out for. Let’s evaluate them here in detail.

Look at returns beyond 1 year: You need to evaluate the mutual fund performance over 1 year, 3 years, 5 years and 7-year performance. A reasonable yardstick is the mutual fund performance over the last 5 years.
Mutual fund performance comparison against benchmark: You can start by making a mutual fund performance comparison against the benchmark. When you compare, you need to evaluate the period of consistency during different market cycles against the benchmark. This will help you assess whether the mutual fund has outperformed or underperformed the benchmark.
Risk-reward tradeoff: You need to understand how effective is the mutual fund in offering risk-adjusted returns. As per risk-return tradeoff, if you take a higher degree of risk, it should be compensated by a greater level of returns. For instance, small-cap funds more significant downside risk, but it also has the potential for high returns. The risk is measured with the help of specific mutual fund performance indicators such as standard deviation and Sharpe ratio. Standard deviation is how much the mutual fund performance deviates from the benchmark. The greater the standard deviation, greater is the inherent volatility. Sharpe ratio is the return per unit of risk. In other words, it evaluates the risk-adjusted returns. Look for a fund with a higher Sharpe ratio to earn a better risk-adjusted return.
Compare Average Maturity and Duration: While evaluating debt funds, the average maturity and duration of the fund should match your investment duration. The Average maturity relates to the period after which the underlying securities will mature. A short-duration debt fund has lower interest rate sensitivity than longer-duration funds. You can use Macaulay Durations and Modified duration to evaluate the risk of investing in debt funds. Macaulay Duration indicates the time it takes for the price of the underlying bond in the debt fund to be repaid through its internal cash flows. Modified duration indicates how much the NAV of a debt fund would change if interest rates move by 1%.
Compare Fund’s cyclical performance: Evaluate how effective is the fund manager in outperforming the benchmark across different market cycles. A good mutual fund performance indicator is the Alpha. Alpha measures the return over the benchmark index. When making a mutual fund performance comparison, a fund that generates alpha indicates a well managed fund.

You can use the above mentioned mutual fund performance indicators to help you compare two mutual funds and make a decision. It would help if you considered your financial goal and risk profile carefully in this exercise.

What mistakes should investors avoid when evaluating mutual fund returns?

Every investor, at some point in time, makes a mistake while evaluating investment decisions. There are five valuable lessons learned in the investing arena from these mistakes. Let’s understand them in detail.

Mutual Fund returns over the past year: This is the most popular form of comparing two mutual funds. Comparing mutual fund returns in India over the last year may be the starting point of assessing mutual funds. However, you should look beyond 1 year to make a realistic expectation of the mutual fund returns.
Investing without a financial goal: Your investment decision should not be based upon recommendations of friends and a good financial advisor is a must. For example, suppose you are planning to invest for your children’s education and you have 10 years, you can consider investing a diversified equity fund portfolio instead of parking your money in a debt fund or a fixed deposit. Once you have a financial goal, you can use a mutual fund return calculator that helps you to get an idea of how to calculate mutual fund returns with time.
Timing the market: Another mistake that mutual fund investors make is hasty decisions to redeem or sell their investments due to market uncertainty. Do not invest with the intention to reap short-term profits. You also need to understand that mutual fund returns are taxable. On redemption, the capital gains are taxed as per the holding period. For equity mutual funds, short-term capital gains are taxed at 15% while long-term capital gains are at 10% for gains exceeding Rs. 1 lakh. Taking a hasty decision can be detrimental to your wealth creation journey.
Mutual fund returns comparison without factoring your risk appetite: You need to assess whether, for every risk you take, you are getting commensurate performance/returns? Solely evaluating mutual fund returns won’t suffice, you need to assess the risk-adjusted return using performance indicators such as standard deviation and Sharpe Ratio.
Over-diversification: Diversification is a good thing, but over-diversification is not. For the sake of earning additional mutual fund returns, do not resort to investing in too many mutual funds.

What Your Family Should Know About Debt Consolidation

We are a society of debtors. No matter how hard we try, it always seems like we owe more money than we make. This is especially true with families in North America. Household debt as a percentage of disposable income increased by over 170% in 2020. Part of this is due to the coronavirus. However, many families were already in debt before the pandemic took hold. Now, they are looking for a solution to right their ships. A possible way to return things to normal is a debt consolidation program. Here are some things your family should know about this form of payment option.

It Combines Debts Into One Payment
The biggest issue families have when controlling debt is to get it down to a manageable amount. With added late fees and interest, it feels like the total added to the principle is minuscule. A debt consolidation program works similarly to a standard loan for a home or car. You’re provided with an amount that closes the accounts of creditors, utilities, and other vendors. In exchange, you pay down the loan.

Firms Work To Negotiate Lower Payments
While debt consolidation firms want to help you, they also try to lower the amount of the loan provided. They do this through a similar exercise as a bankruptcy trustee. They negotiate for a lower pay-off amount. This normally works with loans from other banks, credit card companies, and debt collectors. In negotiating with these organizations, the consolidation firm minimizes its liability. Furthermore, it allows you to quickly pay down the loan.

It Is Not A Form Of Bankruptcy
A debt consolidation program is not a form of personal bankruptcy. In this practice, a trustee is brought on to negotiate with creditors on amounts owed. While bankruptcy features an amalgamation payment similar to consolidation, the effects it has on your credit are more harmful. For example, debt consolidation in Canada is in the form of a loan. Firms support these programs to help families reduce their debt difficulties.

Payment Plans Are Flexible
Though you still make monthly installments on a debt consolidation loan, the time it takes to close it out is flexible. Firms work with you to establish a reasonable payment amount and the months or years you feel it takes to finish things up. There’s a caveat to this. The greater the loan’s length the more interest your family ends up paying. Granted, the value applied to the principal increases over time. However, it’s more incremental for a 60-month loan than for a two-year plan.

It Doesn’t Cover All Debt
Most unsecured debts can be included in a consolidation program. This is in the form of credit cards, mortgages, or auto loans. Yet, some things can’t be added to a debt consolidation program. For example, student loans. Though these are unsecured they tend to be held by a government entity. Thus, consolidation takes place within that institution. Unpaid taxes are also not permitted for inclusion in a debt consolidation program.

Not all Debt Consolidation Programs are the Same
Most debt consolidators want to help you get past the burden of owning money. Hence, they work to get the best value for a program. Nevertheless, not every firm is so giving. Though they say your payments are considerably less than the total of your individual transactions, that statement might only refer to the principal. The exorbitant fees and interest rates they apply make your monthly installments even higher. This is why you must perform a thorough investigation of debt consolidation organizations before a contract signing.

Debt Consolidation is One Step Toward Financial Freedom
Here’s the most important thing to know about debt consolidation programs. They only work well if coordinated with other steps toward financial freedom. To put it another way, you remain in debt if your family continues the same practices.

Conclusion
So, as you pay down your consolidation loan you must learn how to work well with money. This means reducing your expenses, creating a budget, and eliminating the use of credit cards. These changes help get out of the financial basement and into a world of financial security. In the end, don’t let the positives of a debt consolidation program falter.

Shark Deterrents – Past & Present

Since humans have gone into the water with sharks the desire to be able to repel sharks has always been ever-present. The natives in the Amazon used red peppers dragged behind a boat to stop bull sharks and many other ancient cultures used many other methods with little or no definitive success.

Until the 1900′s no real effort was pursued and the pivotal moment was the USS Indianapolis which was sunk in World War II. Once the sailors went into the water the ocean white tips and other open ocean sharks picked off those who survived in great numbers.

This prompted the US navy to develop a shark repellent that would give sailors a sense of comfort and safety if they found themselves in the water with sharks. The packet was composed of a dye and copper acetate as the main ingredients which in some cases deterred sharks. There was also a bag that the sailor or airman got into which masked his scent and hopefully prevented a shark attack.

Under optimal conditions these deterrents and protective measure worked but the shark being one of the ultimate predators of the oceans was not always prevented from attacking the person in the water. So many conditions need to be perfect for these deterrents to be effective such as the type of shark, the water conditions, salinity, current, proximity to the shark and how hungry the shark is.

In recent years technology has improved and so have innovations in shark defense. Magnets, electro-magnetic fields and chemicals have been developed with varying claims of success.

Some of the products on the market today are the shark banz, shark shield, shark replusion, shark chaser, electronic shark defense system, shark defense and a new entry being, shark bio barrier. Well, the shark may or may not be affected by any or all these systems at any given time, place or condition. That’s a fact!

The prices range from $25 to $499 and everything in between. One thing to consider if the shark deterrent is an electronic device then the salt water will eventually render it useless. If it is a passive magnet device then it won’t break but the science is still uncertain as to its effectiveness. And if it depends on a dead shark chemical then it still is affected by currents, the type of shark, water conditions and other variables. In other words nothing works all the time every time, period!

The thing about sharks is they are smarter than we realize and will sense that the particular deterrent they are dealing with has its limitations and will exploit the limitations by testing what it can or can not do. Remember that all the testing in the world will not prevent an ambush attack or an aggressive shark such as a large bull or tiger shark.

The shark deterrent, shark bio barrier is based on the shark’s smell and electric sensing system and it is a passive system which can’t break or fail due to a malfunction. The bio available essential oils with the natural magnetic mineral, magnetite work in combination to mask your odor, make your presence unpleasant and disrupt their electric sensing system. Priced at $29.95 for the recreational size it is very affordable and comes in a canister with a built in brush so you can lightly coat different objects on your person prior to entering the water. Very easy to apply and remove.

Is it perfect? No, nothing is and may never be! There are so many different species of dangerous sharks that under various conditions will attack out of curiosity, hunger or outright aggression. There are too many variables in play to guarantee total shark deterrence but if you are able to deter many of them then you are much safer than the people who choose to use nothing at all. Peace of mind is priceless and anything that can provide it is also priceless.

Do your own research and make an educated decision on what shark deterrent you want to depend on. Something to consider is that the US Navy has not officially endorsed any shark repellent on the market today and they have the most stringent testing requirements in the world today!