How To Compare Mutual Funds If you have come to the decision to look into mutual funds with a view to investing, you will soon see that there are thousands of mutual funds. This makes comparison complicated. The only sure way of achieving this enormous task is by carrying out a comparison of the different mutual funds. Even if you make a decision to go to a professional financial adviser, you should still carry out your own comparison of mutual funds, so that you can understand what your consultant is saying, ask questions and even make recommendations. There are a number of methods of comparing mutual funds' performance, depending on how much knowledge you already have or how much research you are prepared to carry out. At the first level of investor knowledge, you could start by choosing funds that meet the fee structure that you like, then chopping out those that do not invest in what you like and then examining more meticulously the two or three groups left on performance. At the second level, you could start by choosing funds investing in stocks that you like, and then strip out the ones belonging to investment groups that have not performed well during the last few years At the third degree, you could look in the annual performance lists, compare up to three year's results and decide on the investment companies that most regularly appear in the top five or ten on the list. Let us look more intimately at the third mode of mutual funds selection. Start by searching on the Internet for a firm that ranks mutual fund classes by annual performance. You have to make a decision how deep you want to look here: check the top five or ten companies for the last three, five or ten years. Note down any names that seem in all or a few of the years that you are studying. Take the top three most regular, top performers. These investment groups make up your short list. Now go to the websites of those firms and see which mutual funds they manage. Check if there are any that you like. Use such criteria as investment strategy and fees to make your choice. Note them down for every investment group. Now return to your investment firm comparison site and look up the sectors of the mutual funds that you just selected. Did any of the selected funds gain a top place in the performance rankings last year or even a few years running? If so, you have your best funds list. If there are a few top ones, take into account spreading your investment over two or three funds to lower your risk.
If, however, they all did pretty badly, then you will have to go back to your original short list of groups and select ten more mutual funds until you find two or three with a consistently good history of investment. When you have a short list of funds from your chosen investment companies' portfolio of mutual funds, check out their fee structure. make notes and then make an appointment to see an independent financial adviser, whose time you will have to pay for by the hour (one hour should be enough). Do not go to an adviser who is attached to a bank or investment house or one who lives off commissions, because those commissions come out of your investment principal. Owen Jones, the writer of this piece, writes on a number of topics, but is now involved with the Mutual Funds Comparison. If you would like to know more, please go to our web site at Mutual Funds