Attribution Analysis and Picking a Mutual Fund

Attribution Analysis is the strategy of picking a mutual fund that will both give you the highest possible return and the lowest possible risk.

It is a performance based tool that looks at things such as a fund’s investment policy, asset allocation, sector returns and activity.

Each has a major impact on how a mutual fund is likely to perform in the future, for example if a fund actively buys and sells securities it is going to be more expensive to hold then a fund which simply buys and holds those securities for the long haul.

The most important factor for determining a funds future performance is looking at a funds past performance. If a mutual fund has made a 30% return for 15 years it is likely to continue making a good return over and over again. But be careful, if a fund had made a 30% return 4 years in a row, but we have been in a bulls market for 4 years it might not hold up so well when times get rough.

When looking at the overall performance it is best to compare the returns it has created over an extended amount of time, at least 10 years. This helps you get a better understanding about what has happened in the past and what will likely happen in the future.

Return from Attribution Analysis to Types of Mutual Funds