How to Buy Mutual Funds
- 1). Identify your goals before you start looking for a specific mutual fund. Different funds are structured and managed for people with varying goals. Some adopt an aggressive and higher risk approaches. They are excellent for people who are willing to accept somewhat higher risk in exchange for faster growth. Other funds are more conservative and better suited to long-term retirement panning. The main point is to know what you want to achieve so you can chose a fund that fits into your financial plans.
- 2). Investigate different mutual funds. There are now over 10,000 mutual funds to choose from. Begin by narrowing your search. You should look at just “no-load” funds. Some funds take a part of your investment up front (as much as 5-8%) as well as charging you ongoing fees. No-load funds don’t do this and many perform just as well or better. You can narrow things down more based on your particular interests. There are funds that focus on specific areas such as high-technology stocks or “green” companies.
- 3). Start researching individual funds. You will need to get information on the funds’ performance over the past few years Look for good performance. How much does the fund earn annually compared to changes in the overall market? Find out how much the fund charges. Many funds charge no more than 1-2% of the profits. Check for volatility. What this means is you want a fund that performs well from year to year , rather than one that has a record of great years mixed with poor years. You can get the information by checking financial publications. Those that focus on mutual funds publish annual listings with this kind of information on many funds. Finally, check a fund’s ratings with an investment resource.
- 4). Make your final selection after you check the prospectus of the fund you are considering. One thing you want to know is who manages the fund. A fund that has performed well in the past but that has a new manager may be suspect. If this is the case, you want to know the new manager’s track record before you make a decision to invest.
- 5). Invest in your chosen mutual fund. You can go through a financial advisor, purchase from an online source, or invest directly with the mutual fund.
- 6). Keep abreast of the fund’s performance and any changes in its policies and especially it’s management. Mutual funds require relatively little day-to-day attention compared to tracking your own portfolio of stocks, but it’s still an investment and you should monitor how it’s doing.
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