How to Select A Good Mutual Fund
There are thousands of mutual funds and many are making money for their
investors year in and year out. How to pick a fund for yourself? Actually it’s not that hard if you follow these
basic formulas.
1. Only purchase a fund that has a ten year or longer performance.
2. Only purchase a mutual fund that has an annual expense ratio of one percent or less. The expense ration is what
it costs the fund to conduct its business.
3. Buy a fund that is no-load.
4. Never purchase a fund that has a one or two year history of excellent gains. These are called one year wonders
and almost never last.
5. Do not buy a government or corporate fund as a long term investment. These funds have had a horrible record
and sometimes the dividend rate declines along with their principle values.
6. Stay with the fund for the long term. Just because it loses some value in a given year doesn’t mean you have
to sell. Long term is the best advice.
7. Always own a fund that feels comfortable to you with its risk tolerance.
8. The categories of mutual funds are Growth, Growth & Income, Income, Balance, and Select Funds that deal
with certain sectors of business such as Technology, Energy, Metals, Electronics and many others. Most fund families
have sector funds.
9. A very important factor on selecting a mutual fund is to measure the funds performance against other funds in
the same category. It’s not hard to select a fund for the long term, it only takes a little investigating and the
Internet is making it easier and easier. All the information is available to you with the click of the mouse.
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