Broker Check

Quarterly Newsletter- 05/03/19

Dear Clients:

While watching March Madness, do you ever wonder how the same basketball teams always seem to end up in the NCAA tournament year after year? Is it the coaching? Is it the players, team comradery, or fans? Is it complete luck? I wasn’t exactly sure of the answer, but it also made me wonder- how do the best mutual funds tend to outperform their peers year after year?

After doing some research, I found five common traits of the best performing mutual funds. These five characteristics include: low fees, high manager ownership of the funds, long term hold investing approach, a consistent and repeatable security selection process, and a talented analyst team supporting the portfolio managers.

Having a low fee structure increases the chance having more money invested in the fund compared to your peers. One way I like to think about this is with buckets. If I have two similar sized buckets, one has a 1-inch hole in the bottom and the other has a 3-inch hole in the bottom, obviously the bucket with the 1-inch hole will fill up faster and hold more water than the 3-inch holed bucket. The same goes for fees. The larger the fee the less money stays in the fund.

Everyone wants to know the person managing their money has some skin in the game. Research shows Fund Managers who actually own some of the fund they are managing tend to outperform funds whose managers do not own the funds they manage.1 One of the first questions clients ask is if I own the mutual funds I am recommending to them and the answer is yes.

Everyone knows one of the richest men in the world is Warren Buffett. But how did Warren get so rich? He did it by buying good quality companies and holding onto them for long periods of time. The most successful mutual funds usually follow this same strategy. They buy companies with great prospects and hold them for many years. 

The last two characteristics go hand in hand. Mutual funds that have a consistent, repeatable process for stock selection and usually outperform those that don’t. And by leveraging a strong analyst team, top performing mutual funds get in-depth research and analysis on the companies they select for their portfolios. Tweaks to this process over the years allow the funds to strengthen their stock selection strategy.      

Every quarter we review the mutual funds that make up our core portfolios. We do this to make sure they maintain their low fees, continue to have high manager ownership, keep the portfolio turnover at a reasonable level and have not made any major changes to their management team or investment selection process. 


Craig J. Rosenblatt, CPA

Financial Advisor

Insurance License #0E18620



Investing in mutual funds is subject to risk and loss of principal. There is no assurance or certainty that any investment strategy will be successful in meeting its objectives. Investors should consider the investment objectives, risk and charges and expenses of the funds carefully before investing. The prospectus contains this and other information about the funds. Contact Craig Rosenblatt at 3429 Castro Valley Blvd, Castro Valley, CA 94546 or call 510-317-2380 to obtain a prospectus, which should be read carefully before investing or sending money.

The views stated in this piece are not necessarily the opinion of the Broker/Dealer and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to Volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. All Investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.


1 Khorana, Ajay, Henri Servaes and Lei Wedge. “Portfolio Manager Ownership and Fund Performance.” Journal of Financial Economics 85, no. 1 (2007): 179-204