How to pick a Mutual Fund?

[TheNinja]

The title and summary state it all. How do you pick a mutual fund out of that many? I sort by the amount of time a manager has been with the fund and then by 5 year % but then what? I'm looking for something solid to put 1/5 of my investment into to keep me steadier through the ups and downs of the market.

BTW, I figure now is a great time to buy with the market slightly down.

 

[bigrash]

I used to invest in Putnam's Voyager B fund. If I had to go back, I'd definitely pick them again.

 

[zanieladie]

Throw a dart at the list.

 

[dullard]

1) Determine what area you want to invest in. Large companies? Small ones? Foreign or US? Growth or value? Etc. This will drastically reduce your choices.

2) Sort by expenses. Find a few that have low expenses. You can't guarantee any fund will do better than another. Pretty much funds will track each other, thus the lower the expenses, the better off you will do. Thus, you are more likely to do better with a low expense fund. This isn't guaranteed, but you at least weight the dice in your gambling favor. Now you'll be left with a small handful of choices.

3) Check to see if any fund routinely underperforms. No fund can routinely outperform any given sector year after year. But a fund can routinely underperform a sector year after year. Ditch any of the bad apples. Again, you can't spot the good apples, but you can spot the bad ones. Now you are down to less than 5 choices.

4) From the rest, I'd just buy one that has its price down at the moment so you buy low.

 

[TheNinja]

Originally posted by: dullard
1) Determine what area you want to invest in. Large companies? Small ones? Foreign or US? Growth or value? Etc. This will drastically reduce your choices.

2) Sort by expenses. Find a few that have low expenses. You can't guarantee any fund will do better than another. Pretty much funds will track each other, thus the lower the expenses, the better off you will do. Thus, you are more likely to do better with a low expense fund. This isn't guaranteed, but you at least weight the dice in your gambling favor. Now you'll be left with a small handful of choices.

3) Check to see if any fund routinely underperforms. No fund can routinely outperform any given sector year after year. But a fund can routinely underperform a sector year after year. Ditch any of the bad apples. Again, you can't spot the good apples, but you can spot the bad ones. Now you are down to less than 5 choices.

4) From the rest, I'd just buy one that has its price down at the moment so you buy low.

great advice, thanks dullard!

 

[GTaudiophile]

Try looking at Morningstar.com? Look for 5-star no-load funds, low-risk, high-return. Be sure to also concentrate on 5-year, 3-year, and YTD returns.

 

[TheNinja]

Originally posted by: GTaudiophile
Try looking at Morningstar.com? Look for 5-star no-load funds, low-risk, high-return. Be sure to also concentrate on 5-year, 3-year, and YTD returns.

Will do...thanks man! :beer:

 

[JS80]

Lowest expense and highest beta FTW.

 

[Aquaman]

Invest in the Pirate Fund .......... ARGHHHHH!!!!!!!!!! :Q

Cheers,
Aquaman

 

[drnickriviera]

Originally posted by: GTaudiophile
Try looking at Morningstar.com? Look for 5-star no-load funds, low-risk, high-return. Be sure to also concentrate on 5-year, 3-year, and YTD returns.

Why 5,3, and ytd? I always look for 10yr and since inception.

 

[JS80]

Originally posted by: drnickriviera

Originally posted by: GTaudiophile
Try looking at Morningstar.com? Look for 5-star no-load funds, low-risk, high-return. Be sure to also concentrate on 5-year, 3-year, and YTD returns.

Why 5,3, and ytd? I always look for 10yr and since inception.

Past performance does not guarantee future results

 

[Descartes]

Originally posted by: JS80

Originally posted by: drnickriviera

Originally posted by: GTaudiophile
Try looking at Morningstar.com? Look for 5-star no-load funds, low-risk, high-return. Be sure to also concentrate on 5-year, 3-year, and YTD returns.

Why 5,3, and ytd? I always look for 10yr and since inception.

Past performance does not guarantee future results

Anyone looking for a guarantee in the markets is a moron.

All past results gives you is an idea. Looking at the Sharpe is probably more telling, but either gives you some indication of volatility.

 

[Taggart]

To start I would say have 70% of your monies in a fund that tracks an index, like the S&P 500. Other 30% in an international fund (again a broad selection of international stocks).

 

[JS80]

Originally posted by: Taggart
To start I would say have 70% of your monies in a fund that tracks an index, like the S&P 500. Other 30% in an international fund (again a broad selection of international stocks).

winnar.

if you're young i would put it in mid/small cap index.

 

[IHateMyJob2004]

I don't know enough about them ...

Try to find a fund that should eventualyl be covnerted t oa clsoe ended fund though.

That's one of the things I have learned in my limited reading of the subject.

 

[JS80]

Originally posted by: IHateMyJob2004
I don't know enough about them ...

Try to find a fund that should eventualyl be covnerted t oa clsoe ended fund though.

That's one of the things I have learned in my limited reading of the subject.

lol i suppose it's a start.

 

[tnitsuj]

The new target retirement funds from T Rowe Price, Fidelity, Vanguard etc. might be a good option. Broadly diversified funds that change as time goes on. Really good option for those without the knowledge/inclination to actively manage thier investments.

 

[IgorFL]

You only need to know one name - Bridgeway

Their funds produce awesome returns, and their expense ratios are based on the performance of the fund. Moreover, the manager of the fund family, John Montgomery, is known for being one of the few truly honest people in the business. He has never let a fund grow too large, and a large part of the money his company makes goes to charity. (I even think there's a clause that he can't make more than 7 or 8 times the salary of the lowest-paid employee of the company... try and find that in another company!)

Vanguard and Fidelity also have some nice funds, but Bridgeway helped me pay off my college loans... from my graduate school stipend!