How to Select a Good Mutual Fund

Sometimes it seems there are as many mutual funds as there are people, but it's important to take the time to choose the ones that further your investment goals.

Difficulty: Moderate

Instructions

Things You'll Need:

• Personal Financial Software
• Wall Street Journal
• Paper And Pencils
• Financial Calculator
• Brokerage Accounts

1. Decide what percentage of your money you will allocate to mutual funds. If you'll be investing less than $15,000 to $20,000 overall, many investors advise that all of your investments should be in mutual funds.

2. Determine how many mutual funds you will invest in. Three to five funds is generally considered an adequate amount of diversification.

3. Decide whether you'll deal directly with the fund manager or use a broker.

4. Diversify the funds you buy in terms of the size of the companies in their portfolios and the businesses that those companies are in.

5. Choose high-performance funds by using Internet resources and newspapers to pick those funds that have had the best performance over at least the last three years.

Tips & Warnings

• Using a discount broker who sells no-load funds without taking a commission makes it easy to switch from one fund to another.
• A large group of mutual funds does not necessarily provide diversification because the companies whose stocks they hold will overlap.
• If you don't buy no-load funds whenever you can, you could lose a good deal of your returns - or even your principal - to commissions.

[sahill]

on 6/19/2008 Sort of skimpy on information here. How about explaining how to do things for the novice investor?

[MichaelWeiss]

on 9/8/2007 When selecting a mutual fund, you should evaluate several factors such as performance, expenses as well as the background and experience its investment management team.

Michael Weiss
http://www.mutualfundinvestor.net/

[MichaelWeiss]

on 9/8/2007 When selecting a mutual fund, you should evaluate several factors such as performance, expenses as well as the background and experience its investment management team.

Michael Weiss
http://www.mutualfundinvestor.net/

[MichaelWeiss]

on 9/8/2007 When selecting a mutual fund, you should evaluate several factors such as performance, expenses as well as the background and experience its investment management team.

Michael Weiss
http://www.mutualfundinvestor.net/

[wyliecoyote]

on 6/5/2007 I am about to go into a 401(k) and do not know what funds or stock to pick. Iam 40yrs old and I don't make a lot of money and the way social security is going i would like to retire with some money stashed away