How to Research Mutual Funds


Researching mutual funds can be a time consuming task if you have no experience. It can be done however with a little careful planning, knowing what you are looking for and where to find it. It will help considerably if, before you start your research, you lay out a long term financial plan. MFs are structured so that they offer investments that are geared to the financial goals of the members of the fund. Your research should be to find one that closely matches your financial goals and to do that you need to know what your goals are. Here is a general guideline to help you in your search.

• First determine your financial goals and how much risk you are willing to tolerate as compared to the gain that you are seeking. If you are still young you can probably tolerate more risk than someone investing for the first time when they are close to retirement.

• Start using MorningStar. You will want to get a clear, comprehensive look at each fund that you are considering, know whether the fund accepts new investors, how much the initial investment requirement is, what the holdings of the fund are, what the fees are (administrative and sales fees), etc. MorningStar is an information financial information portal that specializes in mutual fund research. It has been in business for a long time, has a very reputable reputation and have many tools that can make your research much easier and less time consuming.

• No load funds can maximize your earnings and drastically reduce your fund expenses. Mutual funds are not free. An MF is essentially a financial investment company and as a business must charge fees to cover it’s expenses and make a profit. Some funds charge both maintenance/administrative fees along with sales commissions and you should be aware of what these fees are.

• Look at all the varied holdings of the fund. Some Mutual funds, Like RiverSource specialize in highly speculative, single sector markets. While these investments can generate a great deal of income, they are very risky. If you are a new investor or just conservative you will want to look to a fund that spreads it’s investments over several sectors and types. If you have investments in technology and manufacturing and communications, as well as an assortment of stocks, bonds and money market, the bulk of your money can be protected.

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