| There are a variety of things to look for in a | | | | good returns and expenses less than 1%. The |
| mutual fund before you invest. As mentioned | | | | lower the better, but remember, if you buy a |
| before, the stock market has averaged nearly | | | | fund with an expense ratio of 1.5% that returns |
| 11% during the past 70 years. Depending on how | | | | 12%, it would be better than a fund with |
| aggressively you invest your money, I think you | | | | expenses of .5% that returns 9%. |
| can generally count on a rate of return | | | | Usually I find that most people only care about |
| somewhere in the 10% - 12% range. | | | | one particular number; the past returns of a fund. |
| Now, what to look for in a mutual fund... | | | | While this is great information to be armed with, I |
| I usually recommend an index mutual fund for | | | | always caution that past performance is no |
| most of your investments. An index fund tracks | | | | guarantee of future returns. That is especially true |
| a specific index, such as the S&P 500, which | | | | if a new manager is on the job. |
| are the largest 500 stocks on the New York | | | | An excellent website for free mutual fund |
| Stock Exchange (NYSE). Most index mutual funds | | | | research is Morningstar. In addition, they also have |
| do not have specific managers that are in charge | | | | a free investor's classroom which contains some |
| of the fund, but rather are mostly automated in | | | | great information about not only mutual funds, but |
| their day-to-day operations. If the fund does have | | | | also stocks, bonds and other investments. In |
| a manager, it is important to note that he should | | | | general, we suggest to start out small with a |
| have a long track record of good returns on that | | | | single mutual fund covering a broad range of the |
| fund. If that manager or management team has | | | | stock market, such as small and large companies |
| only been with that fund for the past year or so, | | | | as well as international stocks. When you have |
| there is not much chance that the returns will | | | | over $10,000 in investments, you can start |
| continue to be what they have been over the | | | | branching out to ideally hold 25% in International, |
| past few years. | | | | 25% in Aggressive mutual funds, 25% in Small |
| Another important number to look at is the | | | | companies, and 25% in large companies that pay |
| expense ratio. It is fairly easy to find a fund with | | | | dividends. |