conflicting performances on mutual funds

[Guest scotty69]

In checking performances with different sources (scottrade, cnn-money, and yahoo), i have found significant differences in the 1,5, and 10 year return data.

Is one source more reliable than the other? if so, how do i know which one?

[GBurns]

When comparing you have to adjust each so that they all have the same criteria. 1, 5, 10 year is not sufficient. The start and end date, the frequency of contributions, deductions for fees etc etc makes a big difference.

[John G]

The actual time periods used are often found in footnotes. One way to minimize the differences is to use a third part source - Schwab, Morningstar, Money Magazine, Consumer Reports, etc. When they prepare a table, they try to get comparable data. Look for an explaination how they handled loads for example.

Of course, the numbers that you seem to need have very little to do with future performance of the fund. Why? First, future performance is predictated on the focus on the fund and the past does not give you a great guide for what is likely to be successfull in the future. Often, the short term performance is a contrary indicator.... basic materials surges for two years then stagnates, tech is down then surges, etc. Second, the holdings of the fund are likely to change... Enron is gone, Pfizer is in. Some funds have stable holdings, others change the entire portfolio frequently. Third, the fund manager may change which might lead to a different approach to investments. Peter Lynch eventually left Magellan... but people still bought the fund, even after it became clear that the following stock pickers were not as good. They bought because those 5 and 10 year numbers looked good. And finally, the fund performance may change as it ages past those nimble early years and becomes another elephant. Magellan fund is a good example of this. Under Lynch, Magellan fund grew rapidly. Eventually it became so HUGE (the largest fund at the time) that it was no longer nimble and could not even invest in some of the smaller growth companies that made it famous.

Chasing past performance? Take the required SEC warning seriously - past performance is not a reliable indicator of future success.

Folks that chase performance are constantly looking over their shoulder for what worked last year. You can walk into a lot of walls acting that way. It is far better to reach a general philosophy about your investment style, current age and investment goals. For example, if you are in your 30s you might want to bias your portfolio towards growth stocks. If you are extremely risk averse, you may want to overweight dividend and income (a mix of stocks with dividends and bonds).