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Mutual Fund Advice: Mutual Fund Recommendations, Resources and Radio

Mutual fund investors seek advice, recommendations, information and news from a wide variety of resources such as Morningstar, CNBC, and Bloomberg to name a few. Some sources provide mutual fund advic...

Mutual fund investors seek advice, recommendations, information and news from a wide variety of resources such as Morningstar, CNBC, and Bloomberg to name a few. Some sources provide mutual fund advice while others provide news & information and some provide a combination of both. Mutual fund advice and/or information that is available online, in print, on television or on the radio is almost never personalized and needs to be evaluated in the context of each investorís own investment objectives and circumstances. Further, people should also understand that mutual fund information does not always equal mutual fund advice. Unfortunately, far too many people use information as though it were advice.

Mutual Fund Advice versus Information

It is very important for investors to recognize that when a media source like CNBC reports that XYZ mutual fund has gained 50% over the past 12 months that they are not providing an endorsement of the fund. Sometimes, portfolio managers appear on various television and radio programs describing how their mutual funds achieved their outstanding results. However, a portfolio managerís appearance on CNBC also does not necessarily represent CNBCís recommendation for that particular fund. A fund managerís appearance on a television or radio show generally indicates the newsworthiness of that particular fund or manager. Mutual funds that perform very well or very poorly are sometimes very newsworthy.

Mutual fund advice, on the other hand, is much more than just a performance quote. At the very least, advice is a suggestion based on fact and opinion in the form of a formal mutual fund recommendation. It is very possible to obtain high quality advice from media sources, but is important to remember that the advice is generally not personalized and needs to be tailored to your own investment objectives and needs.

Advice and Credibility

If you are getting advice, how do you know that the advice is good or whether the advisor is credible? Did you ever wonder why Suze Orman has such a strong following? If nothing else, Ms. Orman is an expert marketer who has become very successful and is highly visible in the media. Ms. Orman has found a niche audience in women who are looking for financial advice from someone who they can relate to and trust. By utilizing a down-to-earth and psychologically based approach to offering investment and financial advice, Ms. Orman has managed to help many women. This is very similar to how many people select brokers and/or investment advisors. Personality is important, but it should not be the primary basis for selecting an investment advisor or an advice provider.

The media can have a tremendous impact on the perceived credibility of anyone who provides investment or mutual fund advice. Many people think that if someone is on television or on the radio, he or she must provide valuable advice or must be important in some way. However, a personís ability to obtain visibility does not necessarily mean that he or she can provide good investment advice.

Mutual Fund Advice and Your Due Diligence

Ultimately, it is for you to decide whether a person is credible or not. I would highly recommend evaluating the investment background of anyone who provides mutual fund advice prior to taking any action. Just go to the investment expertís website and read about his or her investment experience. If the expertís biography is limited, then the advice may not be worth very much.†††

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Michael A. Weiss, CFA is the owner of Series 7 Exam Tutor and Finance Exam Tutor

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