Past performance is no guide to the future… but

We all know that past performance is no guarantee of future success. However, it could also be argued that past performance is the only guide to the future!
One of the key ways to choose a fund is to examine its past performance. By analysing how profitable a fund has been, you will get a 'feel' for the fund. Funds have their own individual characteristics. Getting to know these can help you to make decisions that are more intuitive and well-informed.
Many investors believe that certain funds do better or worse than others because they briefly outperform or underperform the averages. However, this is generally believed to be only a temporary phenomenon. Ultimately, funds are thought to revert back to the 'normal' middle ground. If one looks at the performance of funds over time, it is true that most funds do become average performers.
Nevertheless, look for some of the following when choosing a fund:

• The fund has outperformed similar funds in the same sector (e.g. Japan, US Smaller Companies)
• Despite occasional "off-years," the fund has made significant profits over the years.
• The fund consistently has made profits.
• The fund has outperformed some of the principal stock market indices (e.g. FT-SE 100, Dow Jones, S&P 500, etc.)

Some of these criteria may appear to be no more than common sense, but you would be surprised how many investors do not follow them. Often, investors buy a fund based on a "hot tip" from a friend or a "hunch." It is crucial that you know a fund well and can provide reasons for investing in it before you actually do so.
This is where Moneyspider can be so invaluable.
Moneyspider is an online service that not only allows you to monitor and rate your stocks and shares ISAs, Unit Trusts and OEIC investments, on a daily basis, 24/7, it also allows you to compare your funds with every one of the best performing funds in its sector and all other sectors, using our unique rating system.
Armed with this vital information, Moneyspider then provides an execution only buy and switch service, with discounted initial commission charges, making changing your funds a quick and simple process.
Tony Ahearne, Moneyspider.com