How to Select a Good Mutual Fund

Video Transcript

"My name is Julie Asti. I'm a certified financial planner, with Asti Financial Management, and today, I'm going to tell you, talk about how to select a good mutual fund. How to select a good mutual fund. That's really a loaded question, because there are so many dynamics that go into deciding which mutual fund is going to be right for your specific situation, but I'm going to just take a look at the top level, how do you actually select a good mutual fund? not actually, which mutual fund is going to be specifically right for you? When you start to do evaluation on a mutual fund, there are a couple of things that you want to take a look at. The first, that you're going to want to take a look at, is you're going to want to see how long the mutual fund has been around. Ideally, you would want to choose a mutual fund, that has ideally, a ten year track record. A five year track record is fine, but a ten year track record is going to give you, a chance to take a look at how the mutual fund has performed in up markets, and also in down markets. It's going to give you a chance to take a look at the long term performance, not only against it's benchmark. For example, the S & P, or the Dow Jones, but it's also going to give you a chance to take a look at how that mutual fund has performed, in relation to all of it's peers, and other mutual funds that might be in that category. For example, if it's a large cap growth fund, you would be able to find out how that mutual fund has performed, against all the other large cap growth funds that are out there, and if it's been able to do the same, better, or if it has underperformed it's peers. That's going to be one of the first things that you're going to want to look for. The second thing you might want to take a look at, is the manager, and the tenure of the manager. How long has that manager been managing that fund? Maybe the mutual fund has been around for ten years, but there's been a change in the last year, and they have a brand new manager. That would be something to take a look at, because what you're trying to do, is define not only a mutual fund that has a long term track record, but the manager responsible for that long term track record, is still managing the fund, and one of the third things that you're going to want to take a look at, is the strategy of the mutual fund. What you're going to want to find out, is what is the mutual fund trying to do? Is it a bond fund that's trying to provide income? Is it a large cap growth fund, that's trying to provide growth over time? You're going to want to look at the strategy, and what you're really going to be looking for,is has that manager and that mutual fund, stuck to that strategy over time? The way to do research on selecting a mutual fund, one of the best sources out there is going to be morningstar.com. That's going to be a site that's going to provide you with in depth analytics and research on all of the different mutual funds. It's going to provide you with information comparative to different benchmarks. It's going to provide you with, it's the peer information, how well a mutual fund has done against it's peer, and it's also going to tell you, which mutual funds have performed at the top of their class, so you can look for the best performing large cap growth funds, or small cap growth funds, so those would be some tips on how to select a really good mutual fund. I'm Julie Asti. I'm a certified financial planner with Asti Financial Management, and you can learn more about my company or my services at: www.astifinancial.com."