Tips For Investing In Mutual Funds
Tip 1: Read the prospectus before you invest! Study the fund's performance, its loads, fees, investment goals, and distribution.
Tip 2: Select funds whose goals agree with yours. Don't buy new funds. Choose funds with a proven track record.
Tip 3: Don't put all your eggs in one basket. The same principal that makes mutual funds a more secure investment than individual stocks can help you protect your mutual fund investment money. Diversify. Distribute your investment money among several funds.
Tip 4: Think long-term. Plan to leave your money in the fund you select for several years. This allows you to benefit from the market's long-term growth.
Tip 5: Make regular monthly deposits. This will help average out the stock markets' daily highs and lows.
Tip 6: If you feel comfortable handling your own investment decisions, choose no-load funds.
Tip 7: Study the fund's performance. Don't be misled by high loads and fancy sales pitch. An attractive presentation or high load doesn't mean the fund is profitable.
Tip 8: Don't get hung up on trying to save money on fees. In the long run, good performance will by far outweigh any fee.
Tip 9: Don't commit yourself to any plans that penalize you if you cease making regular investments.
Tip 10: If you select a fund with a load, try to get one with a back-end load. With a back-end load your entire investment is earning for you. With a front-end load, a portion of your initial investment is deducted immediately, leaving less to earn money for you.
Tip 11: Try to avoid funds with 12(B)-1 Fees. These fees, while they seem low, are charged annually. Over the life of your investment they can add up to well over the amount charged with a high load.
Tip 12: Keep records. Know how much you invested and on what date. It will help you keep track of how much you've earned.
Tip 13: After you've invested, track your fund's performance and compare it to similar funds. Don't be alarmed over short term losses or gains, but if over a year it's performing poorly, move your money. (Make sure you compare apples to apples. Don't compare a conservative fund to an aggressive one.)
Tip 14: If you're considering tax-exempt funds, calculate the total return before investing. Our Tax-Free Investment Calculator can help.