If someone on television were to give you a list of what they believed to be the best mutual fund companies, you wouldn't necessarily go out and buy them straight away. Before you invest in anything, you need to research that particular fund in the same way you would any other important purchase. Alongside an understanding of the sticker price, you will need to know whether the fund is going to perform exactly as you want it to. You will also need to be sure that the risks that you are taking with your investment do not outweigh the potential benefits.
To find the best mutual fund companies, you need to look at some of the following factors.
The Record of the Fund Manager:
One of the things to consider when looking into the best mutual fund companies is the fund manager's record and tenure. The key to the success of a fund is often the fund's manager, so you should never buy into an investment because of a brand name alone. The fund manager is experienced in knowing when to buy and remove stocks, so he or she will be able to build your money effectively in the way that you want it to grow. A good example of a fund manager that has achieved success is Peter Lynch, who got a lot of attention for his stock-picking prowess in the 1980s.
Remember that Size Matters:
Remember when it comes to looking for the best mutual fund companies, you need to understand the benefits of size. Funds need to follow a certain rule which is monitored by the securities and exchange commission. This rule limits how much of each stock a fund can hold, and when a fund's assets rise, the manager has more money to spread around to other stocks. This can mean that the manager might have to purchase stocks that he isn't thrilled about. Remember to check out what kinds of stocks your manager invests in before you get started.
Look for Consistent Returns:
When finding the best mutual fund companies, it's also crucial to assess success over an extended period of time. For example, the financial crisis in 2008 caused stocks to collapse in 2008. When stocks hit further lows in 2009, the prices rebounded which made that year a good time for stock returns. Because that time period is an anomaly, it's a good idea for people thinking of investing in mutual funds to disregard 2008 and 2009 when they are judging the historical performance of a particular fund. Instead, it's good to look for consistent returns during different time periods to anticipate how individuals perform in bad and good markets.
No Load Funds:
Finally, remember that fund companies will offer different share classes for each fund with different sales charges. Charges are also known as fees or loads, and it's important to make sure that you stick to options that limit your fees. After all, there's no reason to spend more on your funds than you need to. If you find a fund that you want to buy make sure it is a no load fund.