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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Thursday, May 11, 2006

Mutual Funds

Finding a mutual fund can seem like a daunting task when you have little knowledge of where to start. This is why many go to a financial advisor in order to get some help many the right decisions. These decisions are important, but you are very capable of doing this yourself and saving a lot of money at the same time.
Think about what type of mutual fund you want to invest. Keep in mind that you need to diversify your investments so not all your eggs are in one basket. Then go to a website like smartmoney.com to the Fund Finder tab. Here you can drill down in 4 categories:
  1. Fund Classicfication
  2. Return Time (The longer the track record of success the better. Avoid very short time frames in your search).
  3. Fund Family (Not important who you buy from--just make sure it is a no-load fund)
  4. Minimal Initial Purchase
Now you will see historical return rates--DO NOT BASE YOUR DECISION SOLELY ON RETURN--and Lipper Leaders. Sift through the funds and look at their risk, expense ratio, if it is no load, rank, etc. You can find out how much it will cost you to invest in this fund compared to others. Is the risk worth the return? Does it have a consistent track record or does it fluctuate. The more you read the more you learn and then you can make a decision you will be confident in.

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