Choosing Investments

When we talk to people about the universe of investments that are available (over 25,000 mutual funds alone!), they often ask we go about choosing specific investments for our clients. Like Coke, KFC, and Bush's Baked beans, we aren't going to tell you the whole formula, but we do like to give a little bit of insight into our process.

If we are looking to fulfill a growth portion of your portfolio, we filter the 25,000 available funds down to the 7,200 that are suitable for that. Next, we get rid of any fund that is less than 3 years old. We found this timeline gives us enough data to evaluate the fund. Now, we are down to roughly 2,000 funds that are suitable for growth. We continue this filtering process over 26 different points of data, totaling over 3 million pieces, and finally boil the list from 25,000 funds to around 150 choices.

This search allows us to identify funds that do well in both up markets and down markets. They CONSISTENTLY earn respectable returns in up markets and minimize losses in down markets. They have the highest quality of management in their category.

None of these funds are exclusive to our clients, but you typically cannot get some of them from a broker. They have minimums ranging from $25 to $5 million, but in many cases the minimum is waived for a private wealth manager.

Since we do not get paid a commission, a mutual fund with a sales charge is useless to us. However, we do not throw funds with a sale charge out during our filtering process. We are searching for funds with the highest net performance for our clients. The high charge funds typically eliminate themselves with lower net performances.

To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)


To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)