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Advisors and Investing: Selecting, Monitoring Funds in the Portfolio

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All of us as advisors are charged with the responsibility of doing the best for our clients. In the area of money management, it becomes more of a challenge as the number of accounts increase. Oversight of our “book” is paramount and keeping track of each and every investment is the key. There are two components to this: selection and monitoring. Our success is determined by the process we establish and in these markets, it has become quite a challenge.

Selecting the Best

Selecting the “cream of the crop” is ever so important today. There are over 25,000 mutual funds (including all share classes), more than 1,300 ETFs, plus individual stocks, bonds, closed end funds, UITs, LPs, etc. Most advisors, myself included, have resolved to using certain types of investments. For the most part, I use mutual funds and ETFs. Occasionally I will use individual fixed income and CDs. I rarely buy individual stocks. 

My approach to selecting mutual funds begins at the subcategory level. However, unlike in the past, I screen for “arge cap stocks rather than large value and large growth. I don’t mind if the manager moves along the growth and value spectrum, as long as they have demonstrated an expertise in doing so.

To begin, I conduct a very basic screen which yields up to 250 funds. Then, I export the data from Morningstar Principia into an Excel spreadsheet I built which has about 20 different data points. The spreadsheet ranks each fund, compares it to their specific peer group, and assigns a score from 1-100 (a perfect score is 100). I then start at the top and check to see if the fund is available to me, and if so, I narrow it down to two to four funds from each category and make my selection.


Here’s an interesting exercise you might consider. I took all the funds in my book, starting from the largest allocation, and graphed each one on a YTD basis. It was interesting to see which funds are dragging down performance and when this drag began. Even though we can easily get YTD performance numbers, it doesn’t tell the whole story. For example, let’s say a fund is down 2.0% YTD. Was it down 15-20% a few months ago? In other words, at what point did it make a large move, up or down, and why? I plan to do this on a monthly basis from now on. Here’s a little more on how I did it. 

I graphed the first nine funds, then the next nine, etc. With each graph, I included the Dow so I could easily see how the fund performed next to a stock index. Again, it was very revealing. 

How do you monitor your holdings? 

Thanks for reading and have a great week!