How to Find a Mutual Fund

Mutual funds are popular investments, providing diversity and a good return overall. However, investing in mutual funds is not without its risks. If you do your homework before selecting a fund, though, you can choose the risk level that is right for you.

Instructions

Difficulty: Moderate

1. Define your needs. If you are treating your mutual funds as a long-term investment, you can afford to take more risk—leading to the potential of a greater return over the long run. If you need a shorter-term investment, you should play it safe. A smaller, but safe, return will best suit your investment needs.
2. Look at your finances objectively to determine how much you can invest upfront, and how much you can invest on monthly or yearly.
3. Understand the types of mutual funds available. The basic types of mutual funds available are money market funds, growth funds, aggressive growth funds, income funds, high income funds and balanced funds. Each type serves an investor with a different need. For example, high income funds are riskier than other types of funds but have the potential to achieve a high return. Money market funds, on the other hand, pose little risk and a small return, perfect for the investor who can't afford risk. Understanding each type of mutual fund will help you determine which matches your needs.
4. Locate and research mutual funds. There are a number of comprehensives sites online at which you can find and research funds, including their performance over time. Morningstar is a well-respected source for information about all sorts of investments, including mutual funds. You can research the funds at this site and also locate informative articles on investing.
5. Discuss your options with a broker if you need further information or would like additional insight into your investment options. Many larger banks have in-house investment brokers. You can also locate investment brokers online.

Tips & Warnings

• Though most high-performing mutual funds are load funds, meaning that you have to pay a sales commission for them, no-load funds can be equally profitable. Look at performance rather than price.
• Don't invest in a risky fund unless you can afford to loose your investment.