Best Mutual Funds Explained
All you need to know about mutual funds, including the risks, rewards and terms  

Top Mutual Funds

best mutual fundsAlmost there - now finally in this introduction to finding and choosing the best mutual funds, I thought I would cover some of the over-arching principles that you need to consider when researching the market. Whether you are looking for bonds, stocks or money funds, the concept of performance will always be an issue to consider, as is portfolio turnover rate. As you will appreciate it is almost impossible on such a site to cover very single aspect of mutual funds in the detail necessary, but I hope the previous pages have at least given you a good grounding in the basics. So let's take a look at one or two of the broader issues when considering the best mutual funds to buy.

Top Mutual Funds - Fund Performance

For many investors buying into mutual funds, the historic performance of the fund is their guiding principle, and all other aspects are ignored. Though past performance is important it is critical that you keep this in perspective and do not assume that the historic performance, whether good or bad, will actually continue. Indeed, many investors would argue that the longer a particular fund performs well, or badly, then the more likelihood is that the performance is bound to change in the future. I hasten to say I do not subscribe to this view, as there are good fund managers and bad fund managers, in the same way there are good and bad plumbers or doctors!

So a fund's positive performance is a good indicator but it is no guarantee. When studying your funds performance look for consistency, and in particular above average returns over 3, 6 and 10 years particularly if your own investment objectives are based on long term returns. Try to compare your fund against the market index ( if available ) which again will give you a view ( there are some funds which are purely based on the index, naturally called index funds!)

Top Mutual Funds - Turnover Ratio

This is another view of your fund and the rate at which it turns over the stocks in the portfolio, sometimes called churn and gives an idea of the activity in the fund during the year. Now clearly some funds will be buying and selling frequently in line with the objectives for the fund, and others will not, but the level of activity should be in line with the goal of the fund. If not, then this could be a warning sign that all is not well. The ratio is calculated by dividing the average assets in the period ( generally a year ) by the lesser of the value of purchases and sales during the same period. As you would expect, mutual funds with high turnover will also have higher expenses due to commissions etc. Again, turnover should not dictate your investing decisions, but they do provide another view on whether the fund is the best in its class, or simply an also ran.

Top Mutual Funds - And Finally..

Investing in mutual funds is not a get rich quick scheme - it is get rich slow! Returns should be measured in years, not weeks or months. Remember cash in a mutual fund is there for the long term, not for tomorrow ( unless it's in a money fund). In your 20's and 30's you will have a great many pressures financially with children, mortgages and career, but this is the ideal time to start investing, even if it is only regular small amounts these can then be left to grow and mature, based on capital appreciation. Your risk profile may be higher here as you have time on your side. As you move into your mid life, your earnings will be increasing and perhaps your investing will change from capital growth funds, to income and tax free funds. Finally in your 50's and 60's more of your funds should be invested in fixed income for your retirement, travel and leisure, so whatever your age there is always a mutual fund product to meet your needs and financial goals.

OK - that's about it - thank you so much for reading this far, and I hope this site has helped you to learn a little more about mutual fund investing. I have tried to provide an introduction to the subject and cover all the basics for you, but as with any topic one can often only scratch the surface. Indeed there are many  books dedicated just to mutual fund investing and how to pick the best ones.  Please do drop me a line as I am always delighted to help, and may I wish you every success with your future investing and that this site has helped you to find some of the best mutual funds - kind regards Anna.