Finding funds

Q: I want to invest in a certain mutual fund, but it’s not available through my brokerage. Now what? — C.C., Portland, Oregon

A:

Many brokerages offer their customers access to hundreds or thousands of mutual funds, but they might still exclude a fund you want. You may not be out of luck, though: Sometimes you can simply buy shares directly from the fund’s provider — such as Fidelity, Vanguard, Charles Schwab or any of scores of other mutual fund companies.

Note that some mutual funds can be closed to new investors for certain periods. Mutual funds will sometimes close to new investors if their managers believe they have — or will soon have — more money than they can invest effectively. At such times, they’re right to close instead of simply parking money in less promising investments.

If you can invest in funds you want via your brokerage, that can be most convenient, as you’ll be able to buy and sell easily online via your existing account, and you can move money between investments fairly easily — though your brokerage may charge a commission each time you buy or sell. If you don’t like your brokerage’s fees, though, you might get a better deal investing in specific funds directly.

Understanding return on assets

Crunching a company’s numbers can help you assess its attractiveness as an investment. Consider, for example, the return on assets (ROA) calculation, which shows how productive a company’s assets are by comparing the business’s net income to the money it has tied up in assets.

An ROA figure can also reveal how capital intensive a company is. A capital-intensive business is one — like aircraft manufacturers, oil companies, railroads and even modern farms — that requires heavy investments in assets such as factories, equipment, storefronts, inventory, etc. Less capital-intensive businesses include companies such as online marketplaces, consultancies and franchisers.

Capital-intensive companies can be fine investments, but capital-light businesses often have fatter profit margins, wringing more out of each dollar of revenue.

So how do you calculate a company’s return on assets? Take its net income from near the bottom of its income statement (sometimes labeled a statement of operations or earnings), and divide that by its total assets, listed on its balance sheet. In general, the higher the ROA, the better — though remember that ROA will vary by industry.

As an example, Starbucks ended its fiscal 2021 year in October with $4.2 billion in net income. Its total assets at that time were $31.4 billion. Divide 4.2 by 31.4, and you’ll get an ROA of 13.4%. Since the net income covers the whole year, and the assets reflect the last day of the fiscal year, you might instead average total assets from the end of fiscal 2020 and the end of fiscal 2021, to reflect average assets in fiscal 2021. That number is $30.4 billion, and dividing $4.2 billion by it yields an ROA of 13.8%, or nearly 14%.

An ROA of 14% would mean that Starbucks was generating $0.14 in profits from each dollar of its assets. You might compare that with previous year’s ROAs to see if it’s rising or falling, and with ROAs of its peers. You can find ROAs calculated for you on websites that feature stock data, such as Morningstar. com.