How to select the right mutual funds | Economy | -- Your State. Your News.

May 05th
  • Login
  • Create an account
  • Search
  • Local Business Deals

How to select the right mutual funds

Miccolisjerry031910_optBY JERRY A. MICCOLIS

Choosing the right funds is not always the easiest thing to do and most people do not spend enough time understanding their plans in order to get the most out of them. The truth is, spending a couple of hours periodically will benefit you for the rest of your life. Some articles recently have noted that individuals spend more time planning for their annual vacation than they do for meeting their financial goals.

Researching mutual funds may seem like a daunting task, but these days there are plenty of websites out there to help you get through it. Most of the websites are free and contain all the information you will need to make the correct choices. Morningstar and Google Finance will assist you in researching the entire universe of mutual funds.

What to look for?

  • Prior Performance
  • Expense Ratio
  • Fund Manager’s Experience

The first thing most people will look at is the track record of the fund they are investing in. This is a very important part of the selection process, but it is just one element of the overall decision that you will ultimately make. Expense ratio and experience of the fund manager are equally important.

Prior Performance

Look for funds that have track records of a minimum of three years or a specific strategy you cannot obtain by investing on your own. Typically, performance will be published in one-year, three-year, five-year and ten-year increments. Compare the performance of these funds against the appropriate benchmarks, like the S&P 500 Index or Russell1000 Index, as well as other funds in the peer group.

Expense Ratio

Many people think that the best funds have the highest expense ratios, but that is not necessarily the case. In many cases, you are paying for the name or advertising. There are a number of very good funds with much lower expense ratios. For example, index funds may offer an alternative strategy to traditional mutual funds and will usually have minimal expense ratios, so if you want to match the S&P 500 index this is probably your best bet.


Add your comment

Your name:

Follow/join us

Twitter: njnewsroom Linked In Group: 2483509