Quantitative mutual fund analysis involves looking at different aspects of mutual fund performance and characteristics to determine which funds may be the best fit for you. This type of analysis generally looks at hard numbers, such as average returns, or the types of fees that a fund charges. In addition, quantitative analysis reviews the types of investments inside of mutual funds and how the assets of the fund are split up among investment types.
Fees and Expenses
Fees and expenses have a significant impact on the overall performance of a mutual fund and in determining how much return on investment your mutual fund should earn. Fees and expenses can also be compared when looking at different funds to get an idea which will expend the least of your investment capital or returns for management costs. Fees and expenses can have a significant effect on the long-term performance of mutual funds. For a Standard and Poor's 500 index fund, you can find fees of around 0.20 percent. With U.S. stock funds, CNN Money suggests choosing a fund with an expense ratio no higher than 1 percent.
Mutual fund loads are charged as a percentage of the total investment, with that percentage paying the sales charges or commissions to whoever sells the fund. A front load reduces the amount of the investment in the fund by a fixed percentage. If you invest $10,000 in a mutual fund with a 6 percent front load, $600 pays the broker's commission and $9,400 is used to purchase mutual fund shares. A back load is a similar charge, but it's assessed against the value of your shares when you sell, or withdraw money. The amount of the load that's acceptable must be considered in relationship to the performance of the fund and the professional advice and services you receive for the amount you pay.
No Load Funds
Many mutual funds are no-load funds, meaning they do not impose sales charges. These funds are often sold directly from the mutual fund company, bypassing brokers. While you save money on these funds, you also give up the expert advice you can receive from a broker. Some mutual fund companies still advertise funds as no-load but charge other fees, such as redemption fees, that are similar to a load.
Since nobody can accurately predict how a mutual fund will perform in the future, investment analysts performing quantitative analysis of a mutual fund will often look at the historical returns of a specific mutual fund. Historical returns will be provided on a one-year, three-year, five-year, 10-year and 15-year basis, though some go even further back, reporting on the mutual fund's return since its creation. Better returns over longer periods are better signs of top-performing funds than short-term spikes in earnings.
Mutual funds invest their money differently depending on the investment goals of the fund, and they adjust these investments by choosing different types of asset allocations. These allocations also depend on the mutual fund and its management and investment philosophies. Asset allocation is often divided along the lines of a company's size, meaning the stocks held in small, medium and large companies. Allocation is also divided by the type of stock, with value, blend and growth stocks. Growth stocks tend to be the most aggressive and may gain and lose money rapidly over the short term. However, growth stocks have the greatest potential for long-term gains and are a good pick if you can put up with the short-term volatility.
Craig Woodman began writing professionally in 2007. Woodman's articles have been published in "Professional Distributor" magazine and in various online publications. He has written extensively on automotive issues, business, personal finance and recreational vehicles. Woodman is pursuing a Bachelor of Science in finance through online education.