Are you trying to gain clarity on the best way to start investing? There are a lot of investments out there all promoting themselves as the best.
Trying to pick the right mutual fund can be extremely aggravating.
This article will help to provide insight on what factors you should consider when investing.
Here are 5 things to look for.
Low fees Many mutual funds charge ridiculous fees that eat into your investment returns.
Stay away from those with sales charges and fees that are greater than 1%.
There are funds that charge load fees of 5% or more for the "privilege" of investing.
You may even have to pay a sales charge to withdraw your own money.
These investments do a better job of taking your money than making you money.
Long term track record You should judge a fund by its historical track record over the past few years.
Find out the 1 year, 5 year, and 10 year performance of the fund.
Find a fund that has outperformed competing funds over the past few years.
The fund should have a track record of outperforming similar funds and indices in order to justify your dollars.
Potential to outperform over the next few years The past is important but the future is even more important.
Don't chase past returns alone.
Be sure that the fund still has plenty of growth potential ahead of it.
You don't want to invest in a fund that has become bloated with too many dollars chasing the same results.
Fund manager continuity A great fund manager is worth his weight in gold.
So, look for fund managers with solid track records.
You want a manager who has been managing a fund for at least five years and has an investment style that meets your goals.
Good fund managers like Bill Miller and Ken Heebner can add extra percentage points onto your returns.
Fund size Look for mutual funds whose market cap is not so big that the fund manager has a hard time taking advantage of growth opportunities.
Fund managers of funds with large market caps are often unable to invest in small and midcap stocks because they have too much capital to invest.
They are often stuck deploying capital in large cap stocks with lower growth rates than their smaller brethren.
Before investing in any of mutual funds, be sure to do your homework first.
Make sure that the funds fit with your investment strategy, age, risk tolerance, investment horizon, and are suitable for your portfolio.
Trying to pick the right mutual fund can be extremely aggravating.
This article will help to provide insight on what factors you should consider when investing.
Here are 5 things to look for.
Low fees Many mutual funds charge ridiculous fees that eat into your investment returns.
Stay away from those with sales charges and fees that are greater than 1%.
There are funds that charge load fees of 5% or more for the "privilege" of investing.
You may even have to pay a sales charge to withdraw your own money.
These investments do a better job of taking your money than making you money.
Long term track record You should judge a fund by its historical track record over the past few years.
Find out the 1 year, 5 year, and 10 year performance of the fund.
Find a fund that has outperformed competing funds over the past few years.
The fund should have a track record of outperforming similar funds and indices in order to justify your dollars.
Potential to outperform over the next few years The past is important but the future is even more important.
Don't chase past returns alone.
Be sure that the fund still has plenty of growth potential ahead of it.
You don't want to invest in a fund that has become bloated with too many dollars chasing the same results.
Fund manager continuity A great fund manager is worth his weight in gold.
So, look for fund managers with solid track records.
You want a manager who has been managing a fund for at least five years and has an investment style that meets your goals.
Good fund managers like Bill Miller and Ken Heebner can add extra percentage points onto your returns.
Fund size Look for mutual funds whose market cap is not so big that the fund manager has a hard time taking advantage of growth opportunities.
Fund managers of funds with large market caps are often unable to invest in small and midcap stocks because they have too much capital to invest.
They are often stuck deploying capital in large cap stocks with lower growth rates than their smaller brethren.
Before investing in any of mutual funds, be sure to do your homework first.
Make sure that the funds fit with your investment strategy, age, risk tolerance, investment horizon, and are suitable for your portfolio.