investing

Should You Invest in New Mutual Funds Right Away?

A fresh fund can have its advantages, as long as it has a manager you trust.

Let’s face it, there are plenty of reasons to avoid a newly launched fund. For starters, there’s the absence of a long-term track record, as well as the sticky question of whether the fund will survive. So why would anyone buy shares in a new fund?

Because new doesn’t necessarily mean green. If the fund is managed by a proven investor who has honed his strategy elsewhere with good results (see Trusted Managers, New Funds), then you know, to some degree, what you’re getting.

And there are other benefits. Managers at a new fund can build a fresh portfolio from scratch. There’s no need to hang on to existing holdings—perhaps to avoid triggering a taxable gain—that they might not choose to buy today. Plus, new funds are typically small, which means managers can move in and out of a security without tipping off the market or affecting the price. This is especially important with small-company stocks. “Those are all important considerations, and they can tip the scales toward a new fund,” says Dan Culloton, a Morningstar analyst. But nimbleness alone won’t make a difference unless the manager has a reliable strategy.

Kiplinger's Investing for Income will help you maximize your cash yield under any economic conditions. Download the premier issue for free.

Most Popular

15 Stocks Warren Buffett Is Buying (And 7 He's Selling)
stocks

15 Stocks Warren Buffett Is Buying (And 7 He's Selling)

Berkshire Hathaway CEO Warren Buffett is a bull once more! The Oracle and his team entered eight new positions and added to others in a big way.
May 17, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The Best Stocks for a Bear Market
stocks to buy

The Best Stocks for a Bear Market

The ideal bear-market stock pick should have a defensive business, a long history of dividend growth and relatively low volatility. Here are 10 stocks…
May 18, 2022

Recommended

An Impact Investing Guide for Private Foundations
investing

An Impact Investing Guide for Private Foundations

Putting assets in service of mission can take many forms. Here are four distinct approaches to consider in your efforts to foster positive change in o…
May 19, 2022
8 Facts You Must Know About Bear Markets
investing

8 Facts You Must Know About Bear Markets

Bear markets can be terrifying, but they're normal, inevitable and – most importantly – don't last forever.
May 13, 2022
3 Investment Ideas for Retirees Right Now
investing

3 Investment Ideas for Retirees Right Now

Wondering what to do with your retirement nest egg? These three portfolio moves may be worth taking a look.
May 12, 2022
The Best Vanguard Funds for 401(k) Retirement Savers
mutual funds

The Best Vanguard Funds for 401(k) Retirement Savers

Vanguard funds account for roughly a third of the 100 most popular 401(k) retirement products. We rank Vanguard's best actively managed funds, includi…
May 10, 2022