Financial Channel

For those of you that have a portfolio through ING...

How have their conservative, moderate, and aggressive portfolios done over the last months/years.

http://www.ingdirectfunds.ca/en/fundperformance.jsp


I personally have the AGF Dividend Income. Been paying out very well and high returns. It's at a negative right now but would be good to buy. I like the fund managers style too.

They are 3rd party funds.

Past performance in mutual funds is usually a poor indicator of future performance. Usually the obverse is true. If a fund has shown outstanding gains in the past, you are probably due for an equal and opposite reaction in the future. The CBC news had a segment a couple of months ago that supported this contrarian view of evaluating a fund by its past performance.

Some are managed more efficiently and some may even consistantly produce better than market average returns. All mutual funds are limited in how aggressively they can manage the portfolio by various regulatory statutes.

When considering purchasing mutual funds remember that you probably want something with a little more "upside" than the hottest performers of the past.

I would highly disagree. Mutual funds are professionally managed. The fund managers have a team of analysts working to constantly provide positive returns. However, if the market goes down, the fund can be expected to decrease as well. The 5 & 10 year return is a VERY good indicator of the relative strength of a fund. The 1 year return is something I would consider relevant to your statement.

I have the utmost respect for your opinions expressed in this section and regard your answers as authoritative. I wish I could find the text from the news item to lend some support here. It was a broad survey and analysis of past vs future performances for 1, 3, 5, 10 and possibly even 30 yr periods of 100's of funds. Consistently, the greatest gains over all periods were made by previously under-achieving funds. Fund managers that achieve high returns are faced with an influx of cash from investors that have noticed their hefty rate of return in the past. There are only so many bargains to be had, the manager must find a place for the money whether their are favorable opportunities or not. Some funds simply become too large.Their holdings start to look like the TSX and they go as the market goes. When the market declines they are deluged by small investors wanting to redeem their funds. This only compounds the problem as they are forced to sell equities at a lower price than they were purchased to cover increasing outflow of cash from their funds. During a decline more broadly based funds are more apt to contain more dogs than winners. Some smaller funds are able to appreciate even in a broadly based market decline. These funds are probably the ones that have shown losses during market upswing but have stocks that are now "maturing" and their portfolios contain more winners than dogs. Fund mangers buying stocks they feel are "undervalued" at times may just be plain wrong or may have to wait longer than expected for the market to "correct" a stock to it's proper valuation delaying the "maturation" of this holding. While it does seem counter-intuitive to pick a fund for it's poor performance it does make sense when you consider that the market is to an extent cyclical and timing is everything. When buying stocks the idea is to buy low & sell high. When choosing a mutual fund you might want to want to find something that is out of fashion until your neighbours start asking about it.

I agree in some points. To an extent. Depending on the size of the assets under management of a portfolio manager, you can determine how they handle themselves. With low amounts, it would be easy to see higher returns, but with larger amounts as you've said, it starts becoming questionable on their ability to maintain the returns. Though the question is more on how will the fund do for years to come. We don't necessarily look at huge returns as they may be more rare to find, though we try to find funds with consistancy and outperforming the index. There are only so many times that funds can have huge returns but if you want a better idea of how a fund would perform, 5-10+ year performance is a very good indicator. Also look at its yearly returns based on inception period. Some funds show no negative years in the past 10 years or only 1-2 negative years. This somewhat indicates that it sticks to its original style of investing and not the hype. Berkshire hathaway I believe has had only 1 negative year. Timing the market is too much of a waste of time. In some cases though, purchasing funds that usually do good, but have had a negative year, would also be smart to do. For example getting in now with all the funds being so low.

what fees do I need to be aware of when purchasing mutual funds through a general bank and/or ING direct? I'm very much new to mutual funds and don't know a whole lot about it. Can ING mutual funds be bought from your ISA account on a monthly basis?

Almostfreeman,

No need to find a source. I agree to some extent with those points. It is just another perspective on how to select the appropriate funds. Choosing "out of favour" funds is very risky and not recommended. This is because a fund has many underlying investments. Therefore, one must analyze all of the main holdings to get a better understanding if the investment is worthwhile. And since it is difficult to obtain the latest month-to-date holdings, this becomes even trickier. Imagine analyzing every fund you are interested in..... Too much time for the return it may provide. Also, an advisor may have a hard time recommending that particular fund b/c of its lack of performance. The lack of performance is directly attribuied to the fund manager...and the advisor must have faith in the fund manager to recommend the investment to his/her client. Like I said previously, the long-term track record of the fund is a direct reflection on how the fund may perform in years to come. Consistency is key!

Good luck.