How To Pick A Mutual Fund

Mutual funds by definition are a mixed bag of stocks, bonds and a little cash. Their price per share is the NAV, Net Asset Value of the total amount of money in the mutual fund divided by the number of shares. They seek to be fully invested at all times.

The fund manager determines which stocks and bonds to buy and sell in order to give the greatest return to his shareholders. He is considered to be an expert in choosing stocks for appreciation of value and should be expected to give a better than average return. That's why he draws down a six-figure income.

You are encouraged to pick a fund that has your goal in mind. Is it considered conservative, speculative, income oriented, growth or some other category? Wouldn't you say one of the principle reasons was to have the greatest return on your money? Do you want an average return or do you want an above average return?

What is average? There is an index which you hear about on the news every day called the S&P500. Because it is composed of 500 different stocks it is broadly representative of the market as a whole and therefore called a market average or index. You certainly would want a fund that is doing better than average.

You are encouraged to read the prospectus. Did you realize that the day it is printed much of the information in it is over a year old? It is written for the regulators in Washington, not for investors. It is worthless. Throw it away.

There are load funds that charge a commission and no-load funds that do not charge commission. There is no proof that paying a commission will provide you with a better return. Buy your no-load funds direct from the fund or through a discount broker.

You are told to find a good fund manager. Various money magazines list them. Investor's Business Daily does a feature story on different fund managers several times each week. Check to see if his fund is outperforming the S&P during the last 12 months. There are very few fund managers who have a consistent record and even the best of them gets cold once in a while and has a losing streak. You want your money returning at maximum at all times so you can't stay with one manager when he is running cold. Change funds.

One of the Wall Street myths is that you should put your money into a "good" fund and let it stay there for years. This is promoted because mutual fund managers are compensated by the amount of money they have in the fund and not for performance of the fund.

So how do you pick a fund? Very simple. It must outperform the S&P500 Index. Any mutual fund manager who cannot beat a market average should not be holding your money. Check out your funds today.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

In The News:

Dumped mutual funds? It’s a bad idea  The New Indian Express

Staying Sane While Wall Street Crashes

Everybody is riding the Wall Street Roller coaster. Even if... Read More

Cash Is A Position

I go to the Money Show every year to visit... Read More

When?

When will the stock market stop going down and start... Read More

Stock Market Volatility

In my opinion, due to the volatility of stock market... Read More

How Commodity Trading Differs from Stock Trading

There are major differences between trading stocks and trading futures.... Read More

Dont Lose All Your Money

That sounds like good advice doesn't it? Don't lose all... Read More

Stock Trading Success

The ABC's of Stock Trading SuccessStock trading success...why is it... Read More

Again With the Bubbles?

A few years back ? it seems like an eternity... Read More

Making Outsized Returns in the Stock Market - Using the Dow Theory

The Dow TheoryCharles H. Dow... Read More

The Holy Grail (of Investment)

Every year I go to the Money Show in Orlando,... Read More

Buy and Hold Investment Philosophy

Wall Street has been preaching the doctrine of Buy and... Read More

Forecasting the Stock Market

Every day I see in the financial section of newspapers... Read More

Your Job

There are so many kinds of work that needs to... Read More

How Much Money Can I Make With Trading? What Account Size Do I Need To Start?

What account size do I need?How much money can I... Read More

The Information Age

It is wonderful to be alive in the information age.... Read More

E-mini Day Trading - Day Trading for Beginners - Stock Market Timing Software

I mean it when I say that. While plastic silverware... Read More

How Eating Bitumen Made Me a Better Trader

Trading is a fascinating activity.There are so many layers to... Read More

Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to... Read More

How To Pick A Mutual Fund

Mutual funds by definition are a mixed bag of stocks,... Read More

The Stock Market is a Roller Coaster: Prepare for the Ups and Downs

IT'S REMINISCENT OF THE OLD children's tale about an old... Read More

Peer Groups

Whenever I see mutual fund comparisons in the trade publications... Read More

Humpty Dumpty the Stock Market Falls Down

Humpty Dumpty had a great fall and all the King's... Read More

Stocks Options Trading

Let's assume that you want to make some serious money... Read More

Fake Money

Reach in your pocket and take out that big roll... Read More

Stock Market Investments

If there is one term over-used when talking about making... Read More