Fri | Sep 22, 2017

Financial Adviser | Finding the best-performing mutual fund

Published:Sunday | May 29, 2016 | 5:00 AM

QUESTION: I am interested in investing in a mutual fund in Jamaica. What would you say is the best one at the moment that will give me good returns? Is there any way I could get a side-by-side comparison of the currently available ones?

- Jannell

FINANCIAL ADVISER: The mutual funds sold in Jamaica are not local funds, being primarily US and Canadian and sold in the currencies of those countries. There is a reasonably wide range of diversified funds, but there does not seem to be a medium that presents their performance in a way that facilitates comparison.

Most licensed securities dealers who sell mutual funds sell the CI Funds. Though based in Canada, some funds are denominated in Canadian dollars and others in US dollars. Only about 40 of the large suite of CI Funds are registered by the Financial Services Commission for sale in Jamaica.

I can see why these funds would be attractive to you. They invest in many geographical regions of the world, for example, Europe, Asia, and North America. They invest in several asset classes such as stocks, bonds, and other interest-bearing securities and offer several types of balanced funds. They cater to the various risk profiles and investment styles and are managed by a diverse group of fund managers.

The minimum sum required to make an initial investment in at least one case is US$500 or C$500, with additional investments being US$50 or C$50 depending on whether the fund is denominated in US dollars or Canadian dollars. In some other cases, the minimum initial investment is US$1,000 or C$1,000.

The CI Funds are not the only ones available on the local market. Scotia Investments sells a suite of Scotia Mutual Funds, which allows investors a wide range of options. Like the CI Funds, they are spread across US, Canadian, and global investments.

Information on the Scotia Mutual Funds can be found at https://www.scotiainvestmentsjm.com/product_scotia_bank_mutual_funds.php and information on the CI Funds is available at http://ci.com/web/priceperf/priceperf_index.jsp?lang=ENG.

The former is quite detailed and includes the risk profile of the fund, historical growth, asset allocation, sector allocation, and the net asset value - which serves as the price in many instances.

The information presented on the CI Funds includes the net asset value, the currency and the level of change over one day, one year, three years, or since inception of the particular fund, but note that only some of them are available in Jamaica.

Comparing the performance of the various funds can be challenging considering how the data are presented. Further, I have not yet come across any presentation of fund performance that is presented in the way that you are interested.

Be careful to note that it is not necessarily the fund that gives the highest returns that is the best one for you. It is important that the instrument you invest in aligns with your level of risk. If you are not by nature given to taking high risk, high-yielding, high-risk instruments should not appeal to you.

You should also note that past performance is no guarantee of future performance. Today's best performer could be tomorrow's worst performer.

Know your risk level and seek professional help to identify instruments that align with it and then select from the instruments that fit your risk profile those that are more suitable for you. Take time to make your decision if necessary.

A good place to start is to identify the licensed securities dealers who sell mutual funds and decide which one you want to do business with. Ask penetrating questions if you must and do your own reading, even if your knowledge is limited.

If you need to compare the various CI Funds, identify the ones available on the local market and then go to the CI website for detailed information on each. Be prepared to spend some time doing your research.

The Scotia website I cited above has far fewer funds to explore but has much valuable information.

-Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. finviser.jm@gmail.com