AboutWarren Boroson Expertise Author of "Keys to Investing in Mutual Funds" (Barrons) and "Ultimate Mutual Fund Guide" (Probus). Columnist for Gannett News Service.
Experience Author of 20 books; winner of 1996 Personal Finance award from Investment Company Institute and Washington University. Formerly on staffs of Money and Sylvia Porter's Magazine. Had a radio program (on WEVD)about mutual funds and a newsletter, FundDigest.
Expert: Warren Boroson Date: 2/1/2008 Subject: Funds to avoid
Question Hi Warren,
In your experience, what global and local funds (including sectors and indexes) should young investors generally tend to avoid?
Thanks
Answer Dear Jim--
Interesting question.
Keep in mind that the narrower your choice, the riskier--but possibly the more rewarding. A single-country fund is far more risky than a global fund (global meaning US and foreign), but possibly more profit-making.
What to avoid?
Funds that have gone up a lot recently. (No, it's not a "random walk." What goes up fast is all too likely to regress to the mean.)
Funds that have high relative expenses.
Funds that have a lot of turnover. ("Growth" funds are inherently more dangerous than "value" funds.)
Funds that are concentrated.
Single-country funds where you don't know a helluva lot about the country--eg, how liquid the stock market is. (Actually, young investors should probably avoid ALL single-country funds. Really. Although I've made a nice piece of change with FXI. But a good money manager can decide when and how much to invest in the BRIC countries--in China, India, and so forth.)
Funds denigrated by Morningstar.
Funds NOT from big famous top-notch families. As someone has pointed out, a poor-performing fund amidst a lot of top-performing funds in the same family will get lots of attention. Also, if a star leaves a big family, the family can more readily replace him or her.
