Step1 Always know the goals of your mutual fund. The first thing you want to do in choosing the right mutual funds for you is to identify the goals and risk tolerance of the mutual fund. Before aquiring shares in any fund, an investor must first identify his goals or desires for the money being invested. Identifying a goal is important because it will enable you to narrow down the list of more than 8,000 mutual funds in the public market today.
Step2 Risk tolerance is a key factor. In addition, the investor should also consider the issue of risk tolerance. Do you want a more conservative investment or a swinging portfollio? Identifying risk tolerance is as important as identifying a goal. Afterall, what good is a investment if the investor cant sleep at night.
Step3 The next thing that you want to consider is the style and fund type. If the investor intends to use the money in the fund for a longer term need, then the style/objective he or she may be suited for is long-term capitol appreciation fund. If the investor is in need of current income, he or she could aquire shares in a income fund.
Step4 The next thing is charges and fees. Mutual funds make their money by charging fees to the investor. It is important to gain an understanding of the different types of fees. Some funds charge a sales fee which will be charged upon investment or sale of the investment. Another fee is the front end fee which is paid out at the initial investment and the other is a back end fee which is paid out at the sale of the investment. To avoid these fees, look for no load-funds.
