How to choose a fund



All funds have personalities, and there are so many different styles to choose from.

And there are so many styles to choose from: growth strategy versus value strategy; large cap, small cap or somewhere in between; domestic or international funds. And really, you should look at them all. Just remember: Diversification is key. Choose some large, reliable funds with consistent performance as your core, then add riskier, possibly higher returning funds to fill in the gaps -- whatever your tolerance for risk will allow.

Here are five key characteristics to investigate, regardless of what kind of fund you are looking at.

Manager experience: Find out how long the manager has been there and what his or her track record is. Likewise, if a fund has a long track record of success but the manager is new, then the track record does not matter.

Management fees: Index funds will almost always have lower fees than actively managed funds.

Load vs. no-load: Load funds charge a commission, no-load funds don't. Load funds do not necessarily make more money.

Turnover: The more a fund has turned over -- in other words, the fund's holdings are traded -- the higher the fees. Why? It costs money to buy and sell stock.

Income tax implications: Unless you are investing in a tax-advantaged retirement account, be leery of funds with a high turnover rate. There are more likely to be taxes due on all that buying and selling. The more taxes you have to pay, the less money you will have to invest.

Where to begin? Ask for a prospectus for each fund, and start doing your homework.


          Connect with us

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

CDs and Investment

Should lucky gambler play the market?

Dear Dr. Don, I recently got lucky at a casino and won $8,000. I have a car loan and carry balances on my credit cards, but I never miss a payment. I don't want to blow all the winnings by paying down unpaid debt for my... Read more



Dr Don Taylor

The Fed and its punch bowl

The Fed is likely to modify the phrasing of its policy statement to signal that an increase in the targeted federal funds rate is not a "considerable time" off in the future.  ... Read more

Partner Center

Connect with us