If you have decided to look into mutual funds with a view to investing, you will soon see that there are tens of thousands of mutual funds. This makes comparison difficult.
The only sure way of doing this mammoth job is by carrying out a comparison of the different mutual funds. Even if you make a decision to go to a specialized financial adviser, you ought to still carry out your own comparison of mutual funds, so that you may understand what your consultant is saying, ask questions and even make recommendations.
There are several ways of comparing mutual funds' performance, depending on how much knowledge you already have or how much research you are willing to do.
At the first level of investor knowledge, you could start by selecting funds that meet the fee structure that you like, then paring out those that do not invest in what you like and then examining more thoroughly the two or three groups left on performance.
At the second degree, you could begin by choosing funds investing in stocks that you like, and then strip out the ones belonging to investment classes that have not performed well over the last couple of years
At the third degree, you could look in the annual performance lists, compare up to three year's results and opt for the investment groups that most frequently appear in the top five or ten on the list.
Let us look more carefully at the novices' mode of mutual funds selection. Start by searching on the Internet for a company that ranks mutual fund groups by annual performance.
You have to decide how deep you would like to look here: check the top five or ten companies for the last three, five or ten years. Write down any names that appear in all or a few of the years that you are studying. Take the top three most regular, top performers. These investment companies make up your short list.
Now go to the websites of those companies and see which mutual funds they manage. Check if there are any that you like. Use such criteria as investment strategy and fees to make your selection. Write them down for every investment group.
Now go back to your investment company comparison site and look up the sectors of the mutual funds that you just picked. Did any of the selected funds gain a top position in the performance rankings last year or even a few years running?
If so, you have your best funds list. If there are a few top ones, consider spreading your investment over two or three funds to reduce your risk.
If, however, they all did pretty badly, then you will have to go back to your original short list of groups and select ten more mutual funds until you find two or three with a consistently decent history of investment.
Once you have a short list of funds from your selected investment companies' portfolio of mutual funds, check out their fee structure. make notes and then make an appointment to see an independent financial consultant, whose time you will have to pay for by the hour (one hour ought to be sufficient).
Do not go to a consultant who is tied to a bank or investment house or one who lives off commissions, because those commissions come out of your investment capital.
More Information:
Owen Jones, the writer of this article, writes on a range of subjects, but is now involved with
Mutual Funds Comparison. If you would like to know more, please go to our website at
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