Mutual Funds Comparison

If you have decided to take a closer look at mutual funds with an eye to making an investment, you will soon realize that there are thousands of mutual funds and that even funds within a particular group differ quite considerably because of the way they invest, what they invest in and how they make their charges.

The only sure way of accomplishing this mammoth task is by carrying out a mutual funds comparison of important investment information and the terms and conditions.

Even if you decide to go to a professional financial adviser, you should still carry out your own mutual funds comparison, so that you can follow what your adviser is saying, ask questions and even make suggestions.

There are several ways of carrying out a mutual funds performance comparison, depending on how much information you already know or how much research you are willing to do.

At the highest level of investor knowledge, you could start by selecting funds that meet the fee structure that you like, then paring out those that do not invest in assets that you fancy and then researching more thoroughly the two or three groups left on their mutual fund performance.

At the medium level, you could start by selecting funds investing in stocks and assets that you like, and then strip out the ones belonging to investment groups that have not performed well over the last few years

At the beginners' level, you could look in the annual performance charts, compare up to three year's results and choose the investment groups that most regularly feature in the top five or ten on the list.

Let us look more closely at the beginners' mode of mutual funds comparison. Search on the Internet for a company that ranks mutual fund groups by annual performance - Barron's is one such company.

You have to decide how generous you want to be here: look at the top five or ten companies for the last three, five or ten years. Write down any names that appear in all or many of the years that you are studying. Take the top three most consistent, top performers. These investment groups make up your favourites list.

Now go to the web sites of those companies and see which mutual funds they manage and see if there are any that you fancy. Use such criteria as investment strategy and fees to make your selection. Write them down for each investment group.

Now go back to your investment company 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 performance rankings last year or even a few years running?

If so, you have your favourite selected funds list. If there are a few top ones, consider spreading your investment over two or three funds to better spread your risk.

If, however, they all did pretty badly, then you will have to go back to your original short list of groups and pick 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 selected investment groups' 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 tied to a bank or investment house or one who lives off commissions, because those commissions come out of your investment capital.