Best Mutual Funds

What Are the Best Mutual Funds for Your Investment?

Before you can decide just what are the best mutual funds for your own investment, you first need to understand what mutual funds really are and how they differ from buying individual stocks. Simply put, mutual funds are a compilation of individual stocks that are compiled by mutual fund companies, such as Fidelity, Vanguard and American. These can be made up of any mix of stocks and bonds, and are meant to meet an individual investment goal.

The best mutual funds might follow particular industries, while others may be something along the lines of country specific. Because they are so diversified, they are typically much less risky than a portfolio of individual stocks. However, as with most investments, because they are less risk they are typically less reward, meaning they usually pay a smaller percentage than other investments. So with all that information in mind, how can you decide which are the best mutual funds for you and your investment dollars?

Risk Versus Reward

When choosing the best mutual funds for you, of course you need to understand your tolerance for risk. Typically mutual funds are much less risky than stocks because your dollars are spread out among a larger portfolio of companies. For instance, if you choose individual stocks you might have just a half dozen stocks or investments. If one goes down significantly then your portfolio is compromised. With mutual funds, because you have your dollars spread out over so many investments, you're less likely to suffer a setback if any of them drop, even if it's a significant amount. When deciding the best mutual funds for you, it's still a good idea to decide on your tolerance for risk as this doesn't mean that you will never suffer a setback when investing in this option. As with all investments, the higher the risk the higher the reward. Some mutual funds are riskier than others.

One of the reasons you want to consider your tolerance for risk versus reward when it comes to choosing the best mutual funds for you is because your investment decisions may be for different reasons than someone else. For example, if you're closer to retirement you may need a higher payoff immediately, versus the long-term investor that may be able to put off financial rewards in return for more secure investments. Remember that investing is a personal decision and the best mutual funds for someone else's portfolio are not necessarily going to be the best for you.

How the Experts Pick the Best Mutual Funds

Most experts, when picking what they see as being the best mutual funds, don't go for those that have the highest short-term returns. Most rely on what they see as being a well-balanced portfolio that will stay safe through the long-term market shifts.

Typically investors look for companies that have a long-term record of putting shareholder interests first, with experienced managers and lowered expenses. Their returns are typically above average. Rather than being swayed by short-term performance swings, they concentrate on companies that have a solid history of performance. Companies that stand up to this type of scrutiny are what they consider as being part of the best mutual funds.

Picking the Best Mutual Funds for You

There are really no right or wrong answers as to what will be the best mutual funds for you. While your investment advisors may recommend something more high-risk in order to get a higher reward, something that those with a more modest portfolio may need to consider, this is a personal decision. You need to consider your financial goals, your comfort level with risk, and what companies you personally are comfortable investing in. Since there are no guarantees of return when it comes to investments of any type, you need to make your own personal decisions as to what would be the best mutual funds for you.

Keeping Fees Low

Mutual funds often have related fees, so look at the funds related costs. If two funds seem to be equal, you may wish to buy the one with the lower associated fee. Additionally, there are often also brokerage house fees. Our Trading Fee Comparison Chart can help you compare standard trading fees.

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