How We Spot Great Funds

Article Excerpt

Our Successful Investor rating system uses nine key factors to judge a company’s investment quality. They are: a record of profit; a record of dividends; an influential industry position; balance-sheet strength; geographical diversification; freedom from business cycles; freedom from excess regulation or insider abuse; ability to profit from lasting secular trends, like the falling cost of computers; and the ability to cash in on customer buying habits. We look for quality & vulnerabilities Rating a mutual fund is harder, because funds are a step removed from these factors. Before we recommend a fund, we assess its quality or vulnerability on several key areas. We start by looking at the quality of the fund’s holdings, based on our nine key factors. Then we look at its diversification across the five main economic sectors— Manufacturing & industry, Resources & commodities, Consumer, Finance and Utilities. Speaking very generally, stocks in the Resources sector and the Manufacturing sector are apt to expose you to above-average volatility, while those…

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