Choosing the Best Mutual Fund

Mutual Funds are investment vehicles with their funds invested in securities such as stocks, money market instruments and bonds. Operated by a third party money manager, mutual funds seek to invest in securities that will produce capital gains for their investors. However, as with any investing, there is a risk for money loss. So the question is, How do I Choose the right mutual fund?

First of all, all mutual funds have huge advantages over investments in particular stocks or other securities. These funds are professionally managed by a money manager working for your investment firm. This gives the average person the chance to have a diversified and well managed portfolio that would be difficult to develop alone.

Now, When it comes to choosing a fund, many people have different methods. One popular method is to study the past performance, which can be obtained through a simple google search. But, can how a fund did in the past really give us any clue as to how it will do in the future? The obvious answer is no, although past performance is important in determining the credibility of the fund manager's decisions. However, there is no way of knowing what may happen in the future that may affect the securities of the fund.

If you want you can choose a growth fund, which is a fund with holdings in companies that the fund manager feels can sustain growth at the present time. There are also value funds, which have holdings in companies that seem as though their value has not been completely realixed. Or, you can choose a blended mutual fund, which is a mix of the two previous mentioned types. It is up to the investor to find the fund that will suit them best. For example, a growth fund may spend several years dwindling around the same value because that particular market is not ready to grow. But, when it is, one can expect large yields from the fund as the companies expand to meet the growing demands of their market.