Sam Huszczo CNBC

Check this critical data point before buying a mutual fund

Ryan Ermey | CNBC | October 5th, 2020

When buying mutual funds, among the best predictors of success is a management team that invests in its own strategy.

Part of the appeal is peace of mind, says Sam Huszczo, a certified financial planner and founder of SGH Wealth Management in Southfield, Michigan. Fund managers, like all of us, have egos, he says. They may be tempted, if they’re not invested, to make moves to bolster the short-term performance of their fund.

“If a downturn in the market forces a manager into a difficult decision, I want to be sure that he or she is acting in the best interest of the long-term investor,” he says.

As with all things related to investing, the proof is in the performance. Tracking long-term returns tied to manager investment in funds is difficult because managers don’t report exact dollar amounts and because the amount a manager invests can change over time. But in a 2015 study, Morningstar found that funds run by managers with more than $1 million invested consistently outperformed peer funds in which managers invested less.

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