How to spot a poorly performing investment fund
The best ways to monitor your investment portfolio
Investing is a great way to build wealth so you can save towards major expenses such as a mortgage, or for your retirement.
It is important to check on your investment portfolio occasionally, explained Hargreaves Lansdown, when your investment objectives change “or if there have been some big changes in the markets”.
This is particularly true in the current climate as economic uncertainty such as high inflation, rising interest rates and war in Ukraine have been causing “turbulence” on the financial markets, said MoneyWeek, “potentially denting the returns enjoyed from certain funds”.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Here is how to keep an eye on your investment portfolio.
Performance figures
All investment funds will provide documents such as fund factsheets and value-assessment reports that outline their performance over a set period.
Historical returns “shouldn’t be a guide” to future performance, said The Times Money Mentor, but can be an “important gauge of whether a manager has delivered or not”.
Websites such as Trustnet and Morningstar also show how funds have performed compared with their own sector or benchmark.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Keep an eye on the commentaries accompanying this data, said Investors’ Chronicle, as “big moves in and out of different investments” may indicate problems while a change in style may mean the fund “no longer serves its chosen purpose”.
Analyst reports
Some financial firms also produce regular reports that highlight good and bad performing funds.
One of the best known is investment platform Bestinvest’s Spot the Dog report, which “lists the bad mutts of the fund management industry”.
The report highlights funds or “dogs” that have failed to beat their own benchmark over three consecutive years by 5% or more.
Its latest report showed the number of dog funds rose from 44 to 56 and, the assets in those “misbehaving mutts” increased to £46.2 billion from £19.1 billion.
Similarly, Chelsea Financial Services publishes a regular RedZone report that “names and shames” the funds that have underperformed their sector average for three years in a row.
It’s generally seen as a “bad idea” to sell a fund based on poor performance alone, said interactive investor. But it “may make sense” if the fund manager shows no sign of taking action.
Do your research
You can’t rely only on performance tables, said MoneyToTheMasses, as “no fund manager outperforms in every market condition”, but investors need to find the best funds to invest in “for the current environment”.
Different fund managers perform well in different circumstances, explained Willis Owen, and as time goes on, “your position and those of your investments will change”.
That makes it all the more important to understand how a fund is managed, said Charles Stanley, as well as knowing the reasons why it has performed the way it has and “what conditions it will likely perform best in going forward”.
Be careful about too many changes though. People invest for the long term, said Hargreaves Lansdown, so you shouldn’t be worried about what happens to the share or bond price “today or tomorrow”.
If investors stick to their long-term plan, they can avoid making decisions regarding their investments simply as a result of what is happening in the present.
As a “rule of thumb”, said MoneySavingExpert, five years typically gives “enough time to ride out any bumps in the market”.
Also, keep an eye on fund charges, said Which?, as while fund performance can vary, you’ll have to pay the charges “come rain or shine”, which can make a “huge difference” to your returns.
Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously written for FTAdviser, ThisIsMoney, The Mail on Sunday and MoneyWeek.
Create an account with the same email registered to your subscription to unlock access.
Marc Shoffman is an NCTJ-qualified award-winning freelance journalist, specialising in business, property and personal finance. He has a BA in multimedia journalism from Bournemouth University and a master’s in financial journalism from City University, London. His career began at FT Business trade publication Financial Adviser, during the 2008 banking crash. In 2013, he moved to MailOnline’s personal finance section This is Money, where he covered topics ranging from mortgages and pensions to investments and even a bit of Bitcoin. Since going freelance in 2016, his work has appeared in MoneyWeek, The Times, The Mail on Sunday and on the i news site.
-
'Trump is ruled in contempt'
Today's Newspapers A roundup of the headlines from the US front pages
By The Week Staff Published
-
Hainault sword attack: police hunt for motive
Speed Read Mental health is key line of inquiry, as detectives prepare to interview suspect
By Arion McNicoll, The Week UK Published
-
Shardlake: a 'tightly plotted, gorgeously atmospheric piece of television'
The Week Recommends Arthur Hughes captivates in this 'eminently watchable' Tudor murder mystery
By Irenie Forshaw, The Week UK Published
-
What to know amid the rise of separately managed accounts
The Explainer SMAs can provide tax advantages, but investment minimums may be steep
By Becca Stanek, The Week US Published
-
What are the Magnificent Seven stocks and why do they matter?
The Explainer It might seem like a no-brainer to dump your money into these Magnificent Seven stocks — but not so fast
By Becca Stanek, The Week US Published
-
Should you put your money in a CD?
The Explainer Now may be the time to strike for the most competitive CD rates, but that doesn't necessarily mean CD investing is the right financial move for you
By Becca Stanek, The Week US Published
-
How fees impact your investment portfolio — and how to save on them
The Explainer Even seemingly small fees can take a big bite out of returns
By Becca Stanek Published
-
Early retirement: what is the ‘FIRE’ movement?
feature Younger workers are aiming to quit the workforce early through extreme saving and investment
By Rebekah Evans Published
-
Why knowledge is the key to successful investing
feature The best investment anyone can make is education. That’s especially true for investors
By The Week Staff Published
-
What the Ukraine crisis might mean for ESG investing
feature The Ukraine crisis has brought many of the issues around ESG investing into sharper focus. Where does the sector go from here?
By The Week Staff Published
-
Solar panels: are they worth the investment?
feature As electric bills go through the roof demand grows for alternative energy options
By The Week Staff Published