What Makes for a Great Mutual Fund or ETF?

Learn How Axias Wealth Advisors Uses Industry Data to Inform Investment Decisions

Financial products are difficult to assess on your own. Mutual fund companies heavily advertise to market their funds to brokers and individuals for investment. But how can you know which funds have strong performance, or which funds complement your overall investment strategy? We will show you how we do it for our clients.

One of the best ways to evaluate mutual funds/ETFs is to leverage third party performance data. Independent data sets remove the sales pitch from your research process and offer you objective metrics by which to compare products.

Axias Wealth Advisors uses FI360 to assess mutual fund and ETF performance before we recommend any to our clients. FI360* assesses and then ranks mutual funds and ETFs on a scale of 0-100, with 0 being the best score and 100 being the worst score a fund can receive. Results are color-coded for easy-to-read batched rankings.

FI360 uses many quantitative factors when ranking funds:

Inception Date 

How long the fund has existed? Generally, the longer the time with favorable results, the better.

Manager Tenure 

How long has senior management has been with the fund? Turnover in fund leadership can shift the trajectory of the offering (for good or for bad).

Net Assets 

How large are the assets under management? Large funds have their benefits but can become undisciplined by investing in speculative areas to unlock additional gains.

Composition 

Does the fund invest in the asset allocation we require? Our goal is to tune your portfolio with appropriate exposure to certain markets (such as large cap, small cap, emerging markets, etc.).

Style 

Does the fund invest in the style of assets we desire? The proper mixture of growth, value, and blended returns for your family’s goals is our target.

Net Expense Ratio 

How costly is the fund to own? Generally speaking, the smaller the fees relative to performance, the better.

Alpha 

Does the fund beat the relevant market indices net of all fees; and how does such alpha compare to its peer group? If you must pay a fee, it should be for a fund that is providing value through its management, such as by outperforming the competition or another benchmark.

Sharpe Ratio

How does the fund’s return compare to its risk level? If a fund has a strong return through a systematic and consistent strategy, we consider the fund reliable. If a fund takes substantial risk (above benchmark & peer group) then the returns (good or bad) likely aren’t repeatable and thus shouldn’t be relied upon when deciding if a fund should be in your account.  Sharpe measures the additional risks a fund takes while trying to generate alpha. We generally look for the Sharpe ratio to be at or better than a peer group, which indicates outperformance.

1-YR, 3-YR, and 5-YR Returns

How do returns compare to peer offerings over short, medium, and long terms? It is our job to map your financial strategy over your investment time horizon.

Axias Wealth Advisors evaluates each fund regularly to select products we recommend to clients. We do the necessary research to determine the appropriateness of the investment for your portfolio. Reporting is provided to our advisory clients on all of their investments through their online portal.

Want to learn more about our process and how it might help you plan? Visit us as axiaswa.com.

*The Fi360 Fiduciary Score® is a peer percentile ranking of an investment against a set of quantitative due diligence criteria selected to reflect prudent fiduciary management. While historical performance data is one of the criteria on which FI360 may conduct its analysis, past performance cannot reliably predict future results. The rankings, analysis, and opinions of FI360 are for informational purposes only and do not constitute investment advice.  FI360 is unaffiliated with HTK.  The views expressed are those of the presenting party and all data is derived from sources believed to be reliable.

**Investing involves risk, including loss of value, and no investing strategy can assure a profit.  Past performance is not a reliable indicator of future results.  Results may vary.  Mutual funds are sold by prospectus only and are subject to various types of risk.  Before investing in a mutual fund, carefully review the fund’s prospectus and consider the fund’s investment objectives, risks, charges, and expenses.