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Do you Really Know What’s in Your Mutual Funds?

Do you Really Know Whats in Your Mutual Funds?

(Long Story cuz you know Im a stock trader. I am invested in some stocks and funds for the long-term, as well making short-term quick trades.)

I was curious to check into the asset mix of a fund I am invested in, wanting to know if the stocks, bonds, and other assets in the fund had changed over time.

Since Mutual Funds are actively managed, versus Exchange Traded Funds, which are generally tied to an index and are thus less managed, I know that assets in a mutual fund may change with the changing goals and tastes of the fund manager. I also know that the stocks and other assets within a mutual fund may turn over without me realizing it.

So on August 20 th. when I sat down to write this blog, I looked up my Mutual Fund to see if anything had changed.

There were two main problems that I found -

1. The Website that I accessed to look up that information was not current. Even though the date I researched the fund was August 20 th 2013, it only contained information on the fund as of March 30 th 2013. In this day and age of easily accessible information, that is way outdated.

MUTUAL FUND LESSON #1: When you research your mutual fund, go directly to the fund issuing companys website to get the absolute most recent mutual fund information, such as asset allocation mix.

2. Once I went directly to the fund issuing companys site, I learned that there may have been a huge change in the funds asset allocation that displeased me personally, and more importantly, that I was completely unaware of

MUTUAL FUND LESSON #2. Check your Mutual Funds assets, weekly, monthly, or however often you feel you should.

Below are the screens I saw on the computer on August 20, 2013.

(The top photo is from an unofficial website and the bottom photo is from the fund issuing companys official website.)

At March 30 th. the funds top 10 Holdings had 2.06% in mortgage assets.

At July 31 st. the fund had 35% in mortgage assets.

What should I make of this? Its hard to say, because as of March 30, it appears that a large part of this fund is invested in Financial Futures, betting on the Euro. Heck, I thought I was invested in a safe, diversified bond fund, with a very tiny percentage in mortgage assets. The real estate market is a zoo and I am not interested in investing in it at this time.

When I look at the July 31 Sector Diversification for this fund on the issuing fund companys website, I see that a full 35% is invested in mortgage securities. Its possible that either the fund increased its position in mortgage assets or that when I read the prospectus (did I read the prospectus?), I did not understand how invested in real estate this bond fund really is.

For the record, mutual fund companies are not by any means responsible to notify their investors of changes that occur. It is your responsibility to keep up with the funds changes. You need to keep up with your mutual funds changes for obvious reason. As for me, 35% in mortgage assets is not going to work. Too risky, and I like risk. If Im going for a safer investment, I dont want such high exposure to mortgage assets.

One more thing some of you may have noticed on the top picture that the overall portfolio composition doesnt add up to 100%. If you start seeing red flags, dig deeper to get to the bottom. This photo wasnt taken from the fund issuing companys official website.

Always make sure you go straight to the fund issuing companys official website for your information. I cannot enforce that enough.

Keep these things in mind so you can practice safe mutual fund investing and practice always keeping in control of where your money is. As my good friend, Mitch Slater, says. knowledge is empowerment. Knowledge is key.