Denver Business Daily

How to determine which mutual or index funds are best to invest in?

Hi, I am new to this area of finance and have no experience or backround education in it. I wanted to know how to determine which funds are the best to invest in. I have read some material online (limited myselfto top performing funds) but still feel vulnerable since I don't feel I have knowledge whatsoever to feel confident that a particular fund is what will be suitable for me. Are there any indicators which one should look while chooosing mutual funds?

Public Comments

1. Most mutual funds are diversified, which makes them safer than buying stock from a single company. You will probably be safe with almost any mutual fund, but make sure it doesn't have too much of any one kind of stock. In 2001 many people invested too much in tech stocks because they had been making high gains for a few years. Then all of a sudden they dropped because they were over valued. Get a well rounded one with different types--utilities are good safe stocks.
2. Not an easy question, but if you're new at it, "Mutual Funds For Dummies" is an excellentr introductory book about the ins and outs of mutual funds. Whatever you do, stick to no-load funds.
3. It is great that you recognize that you need information before investing. I favor index funds over actively managed funds. It seems the two most important factors in success is having a diverse portfolio and low cost. Index funds will never be top performers nor should they be the bottom performers. Sounds dull but investing, not gambling, doesn't have to be exciting. Get your excitement somewhere else. I suggest reading the Boglehead's Guide to Investing. A good book for beginners. It is based on John Bogle's philosophy - he founded Vanguard and the index funds. It will help you avoid the confusion and bull that is in the media. Also check out the web site below - read the answers to other people's questions or ask your own - they are very kind to new investors.
4. Its best to invest in an index funds because it has little or no management fees. Picking the right one depends on your style and risk tolerance. The SPY and IWM are good index that follow the S&P and Russell 2000.