If you’re new to mutual fund investing, you may be concerned about how to find the best mutual funds for your particular investment goals. It’s a common concern, but there are some things you can do to help ensure that you’re choosing the best mutual funds for you.
Use the experts – There are some very good rating systems out there that you can take advantage of to help you find the best mutual funds for you. Morningstar’s rating system is very good and it’s free. These raters provide you with a snapshot of the mutual fund’s performance, fees that the fund charges and what type of invest the fund is geared toward. While these ratings are not designed to make your decisions for you, they are a good place to start evaluating possible mutual funds to investigate further.
Know your goals – One of the most important factors in choosing the best mutual funds for you is having a good handle on your investment goals. This includes assessing the level of risk you’re comfortable with, as well as how long you plan to leave your money in the mutual fund. For example, if you’re in your late 50’s, planning to retire in 5-10 years, the best mutual fund for you is likely a low risk fund that will can provide income through dividends. On the other hand, if you’re in your 30’s and don’t plan to use the money you’re investing for 20-30 more years, your investment goals may be better served with a higher risk growth mutual fund that reinvests any earned dividends. This higher risk, higher growth account will be the best mutual fund for your goals.
Use reputable mutual fund companies – It’s important to protect your investment by being certain that your mutual fund company is a reputable one. Do your homework and research all your available options before making a decision. It is often wise to find an overall financial planner who can advise you on mutual fund companies as well as other pieces of your total financial plan. Financial planners can be helpful in part because they have had experience with many different mutual fund companies, so they are well equipped to help you choose the best mutual fund companies for you.
Know the fees – Fees are a very significant point to understand when choosing the best mutual funds for you. There’s a simple reason why you should be so concerned with fees. When you factor in the fees you pay to own mutual funds, 80% of them perform under the market. What I mean by this is that 80% of the time, the fees you pay to your mutual fund company cause you to earn less on each individual stock that you carry in that fund than you would have earned on that stock had you owned it on its own. So, if you want to make the most of your money, you should find reputable mutual companies that offer mutual funds with low fees.
Know the performance – While it’s true that past performance is not necessarily an indicator of future performance, it is important to know what you’re getting into. No one wants to buy the mutual fund that performed the worst last year unknowingly. You should be aware of how prospective mutual funds have performed in order to find the mutual funds that are likely to perform in line with your expectations.
In the end, the best mutual funds are really the ones that can help you meet your personal investment goals. Begin by talking to your investment advisor to endure you find the best mutual funds for you.