which mutual fund to invest

[YupGypsy]

when choosing an investment fund, what do you look for? Is it wise to go for the one with the highest historical performance?

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[Ulquiorra]

In choosing an investment fund, past performance does matter somewhat. If a fund is in the red consistently, you probably won't want to put money in there. However, picking a fund simply because it has had consistent gains is also a no-no. When people chase past performance, they typically do it en masse (people are sheep). When that happens, the price of the fund goes up and the fund managers have a buttload of cash to invest in. Having too much money too invest can actually be bad, which is why some successful funds close themselves off to new investors.

That being said, the most important factors to keep an eye on when choosing a mutual fund are expense ratios and turnover rate. In my opinion, investing in an index fund is the safest and easiest option. Few actively managed mutual funds manage to consistently beat the market, while most, despite their best efforts (and advertising) simply equal the market's performance minus the fees involved in operating them.

 

[etf]

it really depends on what stage of the game you're in. if it's going to be your first mutual fund, you want diversity and so an index fund is best. better yet, get a fund of index funds - such as the target retirement funds offered by vanguard or schwab. if you go with fidelity/trowe, you'll get target retirement funds that are actively managed. either way, you'll probably do well in the end.

 

[blanche]

you should acquaint yourself with the mornginstar ratings also. for index funds, not important, but if you're looking to choose another, actively managed fund you can get information about past and present ratings (by people presumably more knowledgable than us) i've never bought w/out knowing this info.

why is this a 5-star fund ? why is this fund now suddenly 3 starts when it used to be 4? sorts of things you won't neccessarily find from just looking at past performance, including what is going on w/the fund managers. you can get the rating (# of stars) online pretty easily, but to read up a little more you have to get the publication itself, public libraries have it on reference.

 

[Adcadet]

Sounds like you're just starting out. I've been researching funds now for about 5 years as a hobby, so I think I know a little bit, but I'm certainly no expert. I hope this is either for a 403(b)/401(k) or a Roth IRA if you qualify. I would definitely go with no-load index funds if you're new to this. I'd check out T.Row, Vanguard, and Fidelity among others. Last I checked Fidelity had the cheapest index funds for those with at least $10,000 to invest (expense ratio of 0.1), and Vanguard was next (many of their index funds require at least $3000, I believe). Depending on who you go with and your tolerance for risk and time horizon, you could pretty easily put together something reasonable - 100% in a total stock market index fund if you're more aggressive, an 80/20 mix between a total stock market fund an a bond fund if you're more conservative, or a target date fund composed of index funds for one-stop shopping - just make sure the expense ratio for a target date fund is reasonable - some of them definitely are not.

 

[etf]

Sounds like you're just starting out. I've been researching funds now for about 5 years as a hobby, so I think I know a little bit, but I'm certainly no expert. I hope this is either for a 403(b)/401(k) or a Roth IRA if you qualify. I would definitely go with no-load index funds if you're new to this. I'd check out T.Row, Vanguard, and Fidelity among others. Last I checked Fidelity had the cheapest index funds for those with at least $10,000 to invest (expense ratio of 0.1), and Vanguard was next (many of their index funds require at least $3000, I believe). Depending on who you go with and your tolerance for risk and time horizon, you could pretty easily put together something reasonable - 100% in a total stock market index fund if you're more aggressive, an 80/20 mix between a total stock market fund an a bond fund if you're more conservative, or a target date fund composed of index funds for one-stop shopping - just make sure the expense ratio for a target date fund is reasonable - some of them definitely are not.

sounds like a good plan; except i would never put 100% in a total stock market, simply because in this day and age you have to have international exposure. I'd go with 70% U.S. total market and 20% international developed markets and 10% emerging markets. to do this with etfs, do 70% VTI, 20% VEU, 10% VWO.

 

[Adcadet]

I figure that many US companies do enough business overseas that you could get away with no dedicated international fund and keep things really simple with 1 or 2 funds only. If the OP is just starting out he/she may not be able to meet the Vanguard $3000 minimums or the Fidelity $10,000 minimums to get the 0.1% expense ratio, especially if he/she is investing in multiple funds.

 

[etf]

I figure that many US companies do enough business overseas that you could get away with no dedicated international fund and keep things really simple with 1 or 2 funds only. If the OP is just starting out he/she may not be able to meet the Vanguard $3000 minimums or the Fidelity $10,000 minimums to get the 0.1% expense ratio, especially if he/she is investing in multiple funds.

actually, these U.S. firms that do work overseas are considered "global" holdings and not "international." the problem is that even though IBM and Coke do most of their business overseas, their profits are still in dollars - and the point of diversifying internationally is to have non-dollar-denominated earnings, sort of like a currency hedge. but yeah, i guess if you're just starting out your core holdings should be in U.S. markets anyway...

 

[Adcadet]

Oh, and here I thought the point of owning firms outside of the US was to provide exposure to equities that may zig when my US equities are zagging, or because there are sometimes better opportunities abroad, or simply because the US doesn't comprise the whole market.

 

[etf]

Oh, and here I thought the point of owning firms outside of the US was to provide exposure to equities that may zig when my US equities are zagging, or because there are sometimes better opportunities abroad, or simply because the US doesn't comprise the whole market.

haha, nah - that's what fixed income is for!

 

[johnstoner]

There's definitely a large growing audience for ETFs. If you are new to investing, consider that ETFs are about passive indexing versus mutual funds which tend to be active. This means that it costs less to own an ETF in the long run. The assumption though is that you will buy many shares at a time as buying shares little by little will eat into your profits.