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Another company involved in ranking mutual funds is Lipper (a
subsidiary of Reuters). Lipper’s method of ranking begins by classifying
the funds based on their portfolios. Then the funds within each class are
evaluated on their 1-year and 3-year performances and their ranks are
their percentile standing within their class. The highest performing
funds are ranked in the first percentile of their class while the poorest
performing funds are ranked in the one-hundredth percentile. Others
would fall in the middle.
There are other companies around that rate mutual funds as well.
Standard and Poor’s, for example, has a fund rating service which rates
managed funds based on risk and performance. Once again, you should
never just rely on simple ratings published by even reputable
companies. The rankings are inadequate in evaluating funds, but it
doesn’t hurt to check them out either.
Ordering Funds
With many funds, you can either buy them directly from their
respective fund companies or you can buy them through your broker.
Each method has pros and cons associated with it. With a broker you
may not have access to all the funds and you would be charged
commissions on your transactions. However, buying funds through
your broker gives you centralized access to all your investments and you
may be able to buy funds on margin. My recommendation is to use
your deep-discount broker for mutual funds, unless they do not have
the fund you are interested in. …
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