From time to time the finance pages publish lists of what are called ‘dog’ funds. You may have wondered what the term means and be concerned about what you should do if you find you’re invested in one of these funds.
Put simply, a ‘dog’ fund is one that is deemed to be performing poorly. All investment funds fall into sectors – for example, UK technology or global emerging markets. Classifying them under these headings means that it’s easier to make meaningful comparisons. They can be compared both against each other and against the average performance for all the funds in that sector. If a fund is consistently showing as being 10% below the sector average, then it can earn the ‘dog’ tag. However, it’s important to remember that companies producing these lists aren’t giving specific advice or recommendations and results are compiled using past performance.
Regular reviews can be the key to ensuring your investments are still right for you. Keeping a close eye on the performance of your assets will mean that underperforming funds can be identified and, if necessary, changes made to your portfolio.
Revisiting your attitude to risk is an important part of any review process. Remember that the right funds for you to be invested in could change at different stages of your life. When you’re younger, you may want to invest in assets with a higher potential for growth but greater risk, because you have plenty of time to benefit from their long-term growth possibilities. As you get closer to retirement, your appetite for risk may alter and you may prefer more conservative investments that produce a steadier return and are less risky.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.