Pick The Right Mutual Fund(s)

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First determine what your risk profile is. Are you a conservative, moderate, or aggressive investor.

 Once this is determined,(You can see my articles on how to determine your risk profile if you need help)determine if you want to work with a broker or not. If you are in mutual funds, and understand “risk profiles” I would suggest not working with a broker. I am a former investment broker.

 If you want a broker I would suggest working with American Funds. Though you’ll pay a “load,” a commission to the broker, they are a great company and have low operating costs or “expense ratios” relative to other broker sold funds. American Funds has a multitude of good choices.

 If you feel comfortable going without a broker, look at Fidelity and Vanguard. Both companies offer very good “no load” funds for investors. But remember you really won’t have anyone to call if the fund implodes, like many did recently. I find a conversation with my broker cold comfort anyway after I’ve lost money. It’s not his fault anyway, usually.

 If there is anything I can tell you to look at when contemplating a mutual fund, its to look at the fund’ s expense ratio. It is listed relatively prominently in the prospectus of a fund. I personally don’t like funds with expense ratios of more than 1%, or 100 basis points in broker speak. A 1% expense ratio means 1% less in returns. However over time it really really adds up.

After you’ve determined what type of fund you want-agressive, moderate, or conservative, look at the expense ratio of the fund and make sure it’s an amount you can live with. Remember no one works for free however.

If you are comfortable with the style of the fund and cost go and buy it. If working with a broker ask why he/she likes this particular company. Ask if the company has bought him/her a meal in the last year. Even if it has don’t run. That’s the way business is done in broker world. But it’s good to know.


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