Mutual Fund March Madness

March 12, 2007

Chuck Jaffe at Marketwatch gives investors something to do during lulls in this year's NCAA Tournament:

See if your holdings have earned their way to your personal "Big Dance." When you find a fund that is "on the bubble" -- meaning it's not an obvious choice to buy again today -- you'll have a "watch list" of funds that may, in time, deserve the boot.

The conference the fund plays in. In hoops, there are "power conferences" -- where a 6th-place team might make the tournament -- and "midmajor conferences," where only the tournament champion goes. In mutual funds, there are asset classes. Your search for a fund should start by deciding the type of assets you want to own.

Conference record. In basketball, it's important to be in the top half of your league. In mutual funds, it's about being consistently in the top half of the fund's peer group, and being in the top one-third over longer time periods.

Quality wins. This is the NCAA's way of saying that you beat good opponents, and a mutual fund's way of showing that it performed well in tough times.

Strength of schedule. In basketball, you want to play tough opponents rather than cupcakes. In mutual funds, it's not a bad idea to favor a fund that has results over a lot of time periods so that you can judge it based on everything from the last quarter to the last decade or more.

Power rankings. In basketball, this is the computer's attempt to suggest that one team is better than another; in mutual funds, it's star ratings, numerical rankings and more."

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