How To Pick The Right Mutual Fund

Do you need some investing help with your portfolio? Are you trying to gain clarity on the best way to start investing? There are thousands and thousands of mutual funds out there all promoting themselves as the best. Trying to pick the right mutual fund can be extremely aggravating. Don’t worry! Buy Like Buffett is here to help.

Here are a few tips on picking the right fund.

1. Stay away from fees, fees, fees.

Look for funds with low annual fees and no sales charges. You can buy high quality, great growth funds and don’t have to pay a fortune to do so. Sales charges are a no no. It is rarely ever worth it to pony up 5.75% to invest in a fund. Find a fund that charges 1% or less in fees. Heavy fees will ruin your investment returns.

2. Everything that sizzles isn’t gold.

Looking at the historical performance of a fund is important but projecting the next 5 years performance is more important. Stay away from the hottest funds that are generating huge cash inflows from new investors. Your best bet may be to search for a solid fund whose performance you believe will thrive over the nest 5 years.

3. Size matters.

Stay away from funds with massive market caps. Funds with large market caps have a difficult time beating them market. They have to invest a large portion of their money in large cap stocks. You want to get a fund that is small enough that it can invest significantly in small and mid cap stocks but not one so small that the fund has very few assets.

4. It’s all about who you know.

Pick a fund with a fund manager with a solid five year track record. You want a manager whose investment style is in line with your goals. If you are an aggressive investor than you want a fund manager that trades in and out of positions in a year. Dividend investors want managers whose fund is not subject to huge price swings. They want stability and consistency.

5. Trust is the foundation of any relationship.

Pick a fund company that you trust. If you are shaky about investing in a particular fund, follow your instincts and don’t do it. It’s important that you trust the financial institution that you are giving your hard earned capital too.