The Inverse Relationship: Fund Performance and Its Turnover & Expense Ratio

The Inverse Relationship: Fund Performance and its Turnover & Expense Ratio

Abstract

When investors are seeking diversified investment options with low initial investment requirements, many investors may find themselves delving into mutual funds. Often times, mutual funds can provide low cost, low maintenance options for everyday investors. The funds that an investor may choose are often professionally managed. The Prudential Jennison Health Sciences fund looks to offer investors a moderate return, with both a high turnover and expense ratio. Overall, this mutual fund does not seem like an ideal investment.

During this day and age, it might be safe to say that a majority of investors, whether he or she be an experienced advisor or an everyday middle class worker, believes that the most money can be made based off what solely he or she may know. Many investment firms and banks understand this and now offer individually managed accounts for investors who would rather manage their portfolio themselves. Often times, these organizations provide a good platform whereby individual investors can research their investment choices prior to making the investment. With that said, it is paramount for everyday investors to understand the goals for their portfolio and the metrics that go into defining them. Particularly, mutual funds are a solid investment that has clearly defined ratios to help one determine whether the fund fits his or her investment policy. For instance, the Prudential Jennison Health Sciences mutual fund presents investors with the option to invest in a vast array of healthcare-oriented companies, all while depicting a pretty good portrait of what to expect if chosen.

This mutual fund boasts a non-diversified portfolio that looks to earn return by investing in the healthcare sciences sector. Given this lack of diversification, being positioned as an equity fund, many of the companies that will make up this portfolio are in a particular industry...