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Author: jbking Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 25310  
Subject: Re: Info Jam! Date: 6/30/2001 11:17 PM
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Greetings Paws917,

Am I supposed to compare each fund's expense ratios and loads to their returns? If so, am I supposed to use 1 yr. or 5 yr. returns?

First, let's note what does go into the expressed returns as noted in http://news.morningstar.com/news/MS/Investing101/mfexpenses.html so that if there are loads you'd need load adjusted returns. I do think you're also going to need to know what share class the plan has as most have a special class that doesn't have a load to my knowledge. Next, note manager tenure, ie how long has the current manager managed the fund, when comparing returns as well as how the fund is doing compared to peers as in the late 1990s many a tech fund did amazingly well compared to the general market but against peers bad tech funds may be easier to spot. I tend to use longest returns under the given management along with using www.morningstar.com for some peer comparisons where under the Total Returns page there is a % Rank in Category that can be useful.

What about the turnover rate? Does that factor in anywhere and if so, how do I use it?

Turnover is I think more a factor of how the manager runs the fund. Does the manager hold a stock for a few months like Van Wagoner funds or does the fund hold its stocks for years. A Turnover of 100% could be viewed as everything in the portfolio was sold in the course of a year is one example while 50% of the portfolio every 6 months is another.

Also, if a fund is posting a negative return for the YTD, that means that so far, for 2001, it hasn't made any money, right?

That means if the person invested in and re-invested all distributions they have some paper losses yes. There can be cases where a person may take fund distributions and use them elsewhere which would give them a different return than you may see.

Take a look at the university area of www.morningstar.com for more background on funds as well as http://www.vanguard.com/educ/inveduc.html since there isn't much on the Fool about this. Last but not least http://boards.fool.com/Message.asp?mid=13403173 is a post that has some Frequently Asked Questions about Index Funds, fyi.

JB
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