Chapter 7. Finding the Best Funds

In This Chapter

  • Keeping your investment from being whittled away by fees

  • Looking at a fund's past and knowing how much risk a fund takes

  • Getting to know the fund manager and fund family expertise

When you go camping in the wilderness, you can do a number of things to maximize your odds of happiness and success. You can take maps and a GPS navigator to stay on course, good food to keep you nourished, proper clothing to stay dry and warm, and some first-aid stuff in case something awful happens, such as an outbreak of mosquitoes. But no matter how much preparation you do, you still may not have the best of times. You may get sick, trip over a rock and break your leg, or face inclement weather.

And so it is with mutual funds. Although funds can help you reach your financial goals, they come with no guarantees. You can, however, use a number of simple, common-sense criteria to greatly increase your chances of investment success. The issues in this chapter are the main ones you should consider when trying to separate the funds most likely to succeed from those most likely to perform poorly. The mutual funds that I recommend in Chapters 11 through 14 meet these criteria.

Evaluating Gain-Eating Costs

A survey conducted by the Investment Company Institute asked mutual fund buyers what information they reviewed about a fund before purchasing it. Fifth on the list, mentioned by only 43 percent of the respondents, were fees and expenses. Therefore, the majority of ...

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