Selecting Investment Funds By Performance, But Is This Always The Smartest Way To Invest On The Stock Market?


Anyone who has followed the news a little bit over the past period has probably heard the name Standard & Poor’s (S&P) pass by a number of times. Especially when it came to the creditworthiness of (the economy) of the Netherlands and especially Shell aandelen were under big pressure after the coronavirus. This credit rating agency is taken very seriously when it comes to assessing financial and economic performance, even to such an extent that a negative rating for a country has immediate annoying consequences on the loan market.

However, Standard & Poor’s is not only concerned with assessing countries and governments, investment funds are also regularly scrutinized by this assessor. These assessments can provide interesting information for you as a potential participant in an investment fund. If an investment fund is assessed particularly well by S&P, it will receive a Platinum rating. With a Gold or Silver rating, a fund still performs well in the various areas (return, risk, management, etc.). From Bronze on, it is already a bit less. The returns are indicated with stars (5 stars is a very high return, 1 star is a low return). In addition to S&P, Moody’s and Fitch are also involved in assessing investment funds.

Comparing fund investments on return and risk

The ratings of the rating companies give a fairly nice overall picture of the working method, success and reliability of an investment fund. However, before you make a choice you will probably want more specific information on certain topics. One point at which investment funds can be compared is the level of return that a fund is able to achieve. Those who are willing to take (relatively) much risk can choose an investment fund that is known for its high returns. However, a very high return usually means that the risks are also quite high. When comparing investment funds, you can assume that return and risk are inversely proportional to each other, regardless of the nice talk that some investment funds proclaim on their own site.

Comparing funds at an additional cost

It is nice to know that your investments in an investment fund are managed by a team of financial specialists and analysts. These people know about it! At the same time, it means that investing through an investment fund involves extra costs that you would not incur if you arranged your investments yourself. The employees of the investment fund have to be paid and the fund wants to improve itself. For this reason, a number of different costs are charged to the private investor who joins an investment fund. Different investment funds have different costs, and the amount of these costs can vary considerably per fund. This makes it interesting to take a good look at the costs when comparing funds. Funds are required by law to clearly state all costs, and they usually do this in a prospectus, what also helps is starting with the so called ”broker vergelijken” to make sure you choose a safe and reliable partner when investing in funds.

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