When it comes to investing, mutual funds are a great option for many investors. This is because mutual funds allow you to get started investing with a small amount of money and still be diversified from the start. But where do you even start? After all, there are thousands of mutual funds to choose from. This post talks about what to look for in mutual funds. The 5 areas explored here will help you narrow the field of mutual funds down to a more reasonable amount. From there, you can check out my posts on the advantages and disadvantages of mutual funds to knock the list down even further. By the time you get done reading these 3 posts, you should be left with a handful of mutual funds to choose from.
What To Look For In Mutual Funds
With close to 10,000 mutual funds to choose from, how do you know which ones are worth investing in? I did a non-scientific survey of a few random people on the street: Other than relying on their financial advisor to tell them which funds to invest in, the majority responded that they choose which fund to invest in according to the fund’s performance.
The ironic thing with this is that every piece of literature you receive from a mutual fund company states that past performance is not an indication of future performance. The funds are telling you not to pick a fund based on this. Granted, they tell you this in an almost unreadable miniscule font at the bottom of the page. In big fonts are the past performance numbers right in the middle of the page. (Sounds like a conflict of interest to me.) Yet, past performance is how the majority of people pick their investments. The industry knows this, which is why they structure their advertisements this way. [Read the full article]