The Best Mutual Funds
There are thousands of mutual funds and well over 100 mutual fund families to choose from.
How does the average investor go about selecting the best mutual fund(s)? Here's a basic investor guide to help you eliminate the losers and focus in on the best.
Your objective in selecting mutual funds should not be to chase performance, but rather to participate in the stock market, bond market and money market.
First, concentrate on the type of fund that fits your objectives, and what percent of your assets you want to allocate to it.
Your basic fund types are stock funds, bond funds, money market funds, and balanced funds.
Then, get specific looking for the best fund(s) of that type.
Here are some investor guide tips to help you.
Consider mutual funds that belong to a major fund family.
The largest families offer a wide variety of funds to choose from, and are likely to be financially strong companies that offer a wide range of customer services.
My favorite families include Vanguard, Fidelity, and T.
Rowe Price.
The larger families attract management talent, and tend to have well-established track records.
Some manage well over $100 billion in investor assets.
You can locate fund families on the internet, and request free information.
Pay attention to yearly fund expenses and sales charges.
For example, you can pay as much as 2% or more a year for expenses, and this comes out of your investment.
Sales charges for stock funds can be over 5%, and can come right off the top when you invest.
The three fund families mentioned earlier offer no-load funds, which means there are no sales charges.
Some of their funds charge less than .
5% per year for total expenses.
The best mutual funds have track records for performance that outperforms other similar funds, and indexes of comparable funds.
This information should be clearly shown in the fund's literature.
The best funds show consistency in performance relative to their benchmark.
For example, steer clear of a stock fund that lost 50% last year when its peer group was down only 30%.
The best mutual funds offer a wide variety of services that are important to many investors.
These include switching privileges, periodic investing plans, periodic redemption of shares, and automatic transfers of money from fund to fund in the same family.
If you are starting out as a small investor, look for a fund with low investment minimums.
For example, you can invest as little as $100 a month in some funds, with the money set up to automatically flow from your checking account to the mutual fund to buy shares.
Most investors I have known would be best off avoiding the performance trap.
Mutual funds are not investments for speculation.
Don't move from fund to fund in search of better performance.
Don't be too impressed by a fund that has a great year.
Last year's big winner in the stock category likely placed some risky bets and got lucky.
A repeat performance is highly unlikely.
Here's a final investor guide tip.
For the majority of investors, an index fund is probably the best mutual fund.
For example, an S&P 500 Index Fund tracks the stock market as measured by that major index, the S&P 500.
You won't beat the market holding such a fund, but you won't have a bad year relative to the market, either.
Plus, the major no-load fund families offer index funds with no sales charges, and low yearly expenses of .
25% and less.
These fund companies have toll-free numbers you can call, and they will be happy to work with you on getting started as an investor.
How does the average investor go about selecting the best mutual fund(s)? Here's a basic investor guide to help you eliminate the losers and focus in on the best.
Your objective in selecting mutual funds should not be to chase performance, but rather to participate in the stock market, bond market and money market.
First, concentrate on the type of fund that fits your objectives, and what percent of your assets you want to allocate to it.
Your basic fund types are stock funds, bond funds, money market funds, and balanced funds.
Then, get specific looking for the best fund(s) of that type.
Here are some investor guide tips to help you.
Consider mutual funds that belong to a major fund family.
The largest families offer a wide variety of funds to choose from, and are likely to be financially strong companies that offer a wide range of customer services.
My favorite families include Vanguard, Fidelity, and T.
Rowe Price.
The larger families attract management talent, and tend to have well-established track records.
Some manage well over $100 billion in investor assets.
You can locate fund families on the internet, and request free information.
Pay attention to yearly fund expenses and sales charges.
For example, you can pay as much as 2% or more a year for expenses, and this comes out of your investment.
Sales charges for stock funds can be over 5%, and can come right off the top when you invest.
The three fund families mentioned earlier offer no-load funds, which means there are no sales charges.
Some of their funds charge less than .
5% per year for total expenses.
The best mutual funds have track records for performance that outperforms other similar funds, and indexes of comparable funds.
This information should be clearly shown in the fund's literature.
The best funds show consistency in performance relative to their benchmark.
For example, steer clear of a stock fund that lost 50% last year when its peer group was down only 30%.
The best mutual funds offer a wide variety of services that are important to many investors.
These include switching privileges, periodic investing plans, periodic redemption of shares, and automatic transfers of money from fund to fund in the same family.
If you are starting out as a small investor, look for a fund with low investment minimums.
For example, you can invest as little as $100 a month in some funds, with the money set up to automatically flow from your checking account to the mutual fund to buy shares.
Most investors I have known would be best off avoiding the performance trap.
Mutual funds are not investments for speculation.
Don't move from fund to fund in search of better performance.
Don't be too impressed by a fund that has a great year.
Last year's big winner in the stock category likely placed some risky bets and got lucky.
A repeat performance is highly unlikely.
Here's a final investor guide tip.
For the majority of investors, an index fund is probably the best mutual fund.
For example, an S&P 500 Index Fund tracks the stock market as measured by that major index, the S&P 500.
You won't beat the market holding such a fund, but you won't have a bad year relative to the market, either.
Plus, the major no-load fund families offer index funds with no sales charges, and low yearly expenses of .
25% and less.
These fund companies have toll-free numbers you can call, and they will be happy to work with you on getting started as an investor.
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