Information You Don't Need
More than 9,000 funds to choose from, hundreds of websites, the prospectus, annual reports...we realize that it's easy to feel you're being bombarded with too much information when choosing a mutual fund.
To make your life simpler, we've put together a short list of what you don't need to look at when you buy a mutual fund:
- Hot market sectors: Today's hot fund is often tomorrow's loser. Just ask anyone who invested in tech and biotech funds early in the new century. What goes up usually comes down.
- New funds: Our recommendation? Never invest in 'em. An untried mutual fund hasn't been tested in bad markets, and we don't want some new fund experimenting with your money! We recommend that you don't invest in any fund that's less than five years old. It just won't have the track record you are looking for to ensure long-term performance.
- Quarterly results: Don't choose a fund because it was the top performer for a three-month period. One quarter's express train to profits often becomes a derailment in the next quarter. What counts: a fund's long-term (1-, 3-, 5- and 10-year) performance record
- A funds "yield": Bond funds are notorious for selling you their yield. But yield is not the true measure of a fund's worth. To choose wisely, check the fund's total return, which is plus or minus the gain or loss of capital, best researched over a 5, 7 or 10-year period. This is very important!
