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Mutual Fund Investing

Here are some rules guidelines to follow when investing in mutual funds:

  • Invest in no-load funds that will beat the index funds in good times and won’t lose as much in the bad times.
  • Index funds are ok. Index funds will do what the market does. You will make what the market makes and you will also lose what the market loses. However, that is certainly ok in a conservative kind of way.
  • No fund company has a lock on all the best funds. For example, Fidelity does not have all the best funds. So you’re probably not going to buy four mutual funds from Fidelity.
  • Find the best managers of these funds by looking at their track record and not the name of the fund. Don’t follow the fund name, follow the fund manager.
  • Look for funds where the manager is making the day to day decisions and not a team of people. Good and bad people come and go on teams and you might not know it when it happens or who is making the decisions.
  • Whenever a fund under performs for 12 months but it has proven itself over the 3, 5 and 10 year time horizon, then it’s time to start watching that fund closely and making a decision within the following 12 months.
  • Use the S&P 500 to compare your mutual fund performance to.
  • Use the EIFA Index to compare international funds to.
  • Review your mutual fund(s) every six months or quarterly.

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