| Next year's top mutual funds list is likely to include | | | | markets should react by sending American stocks |
| at least one equity fund; and those that invest in | | | | to the top of the list. The best mutual funds |
| gold or foreign stocks could be the best mutual | | | | should be good old domestic stock funds that |
| funds to invest in now. But before we jump to | | | | invest in U.S. equities. If other world economies |
| any conclusions, there are three factors to look | | | | grow and outpace the U.S. as they've done in the |
| at. | | | | past, foreign equity funds could be the best funds |
| Equity funds invest in stocks and there are many | | | | to invest in. |
| types of them. For example, you can invest in a | | | | The world markets will react much differently if |
| foreign equity fund that invests in China, growth | | | | the economic environment declines worldwide. |
| or value funds, or in specialty stock funds like gold | | | | Stocks and stock funds in general could get |
| funds. All of them invest in stocks, emphasizing a | | | | crushed, both here and abroad. In a scenario like |
| particular segment of the stock market. | | | | this investors turn to the smaller pockets of |
| Money market and bond funds are unlikely | | | | opportunity. For example, to equities in the smaller |
| candidates for top mutual funds in terms of | | | | emerging economies, or to alternative |
| producing the highest investor returns. With | | | | investments like gold and other commodities. Gold |
| interest rates where they are, money market | | | | funds can be the best funds when investors are |
| funds will be the best funds only if rates soar and | | | | running scared. |
| all types of equities and bonds tank. This is | | | | In picking the top mutual funds there's another |
| unlikely. Bond funds can only be top performers | | | | factor. Management is always subject to change. |
| when interest rates fall significantly, and this too is | | | | If the portfolio manager gets shipped out, you |
| unlikely. | | | | can throw past performance figures out the |
| This means that the top mutual funds next year | | | | window. |
| will likely be some type(s) of equity (stock) funds; | | | | At least once a year you should review your |
| since stock funds, bond funds and money market | | | | holdings and concentrate on holding the best |
| funds (or some combination of them) represent | | | | package of funds that fits your needs and risk |
| about 99% of the fund universe. Now we need | | | | profile. Don't concentrate so much on finding the |
| to look at three factors: next year's economic | | | | top mutual funds that will outperform the others. |
| environment, how markets will react to it, and | | | | Due to the changing nature of the economic |
| mutual fund management. | | | | environment, markets, and managements... the |
| If the U.S. economy picks up and grows faster | | | | best mutual funds one year are rarely on top the |
| than other world economies next year, the | | | | next year. |