How to Find The Best Mutual Funds

Many investment pros want to sell you the way to find the best mutual funds, but the truth is that the best funds for someone else may not be the best funds for you. That said, there are a few key tools available that can help you find mutual funds that suit your needs.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Internet access
• A basic understanding of mutual funds and how they work

Finding Your Best Mutual Funds

1. Determine what kind of investments you want, what you hope to achieve, how much money you have available to invest, how long you plan to invest and what your risk tolerance is.

2. Check out different top 10 or top 20 mutual funds guides available online and in investment magazines.

3. Investigate why the mutual funds on each list are there: analyze their risk factors, costs and returns.

4. Look for mutual funds with high performance over 3, 5 and 10 years.

5. Choose no-load funds to maximize your investment.

6. Find out all you can about the fund manager: how long has she been managing this fund, which other funds has she managed in the past and her success record.

7. Research the companies in which the mutual funds invest. Make sure that none of them violate your moral or ethical standards.

8. Analyze the volatility of the funds in which you are interested. High returns often indicate high risks.

9. Consider enrolling in an online tutorial like Basic Training, which is available at www.winninginvesting.com. The more knowledge you have, the better you will be at selecting the best mutual fund for you.

Tips & Warnings

• Don't spend a lot of money buying guides designed to find the best mutual funds for you. These guides are written to make money for the authors. They may have sound ideas, but in the end, each investor is different with different needs, and a cookie-cutter approach will not work for everyone.
• Don't invest in a mutual fund with a higher risk factor than you are comfortable with, even if it's doing particularly well.

[MichaelWeiss]

on 9/14/2007 I would just add that investors need to thoroughly evaluate a portfolio mangers background including experience and educational credentials. Further, your evaluation should not stop at the portfolio managers. You should evaluate the analysts that contribute to the mutual fund.

Also, the step about making sure the fund's companies do not violate your beliefs is noble but odd. Investors need to focus primarily on the quality of the fund from an investment perspective.

Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net