Selecting a mutual fund

Selecting a mutual fund

When you first get into investing, you have to have a clear idea of what it is you want to accomplish. Most people have long term financial goals like saving for retirement or saving for a second home or maybe to put the kids through college. You also have a time frame. You have 20 years to make this money, or if you get into investing at a younger age, you could have 40 or 50 years to spend investing before your goal comes due. These are all vitally important questions that you need to have answered before you start investing. They will tell you what sort of fund to select for your portfolio. Here are a few general tips for selecting a fund that’s right for you.

 

If your goal is to have the most growth to your capital that you can get, than an aggressive growth mutual fund or an international growth mutual fund is for you. These kind of mutual funds invest in stocks that are hot and have a great potential for hitting it big. The chance for your capital to increase is very high, but the risk involved in these stocks is also extremely high. They are only recommended for long-term investors who can afford to take a hit if need be.

 

If you’re looking for a high amount of capital growth, but you aren’t ready for that degree of risk, try growth mutual funds, specialty or sector mutual funds or international mutual funds. They tend to look more towards long-term success in common stock, not a quick hit. The risk is still considered high with these mutual funds, but it’s not as high as the previous option.

 

If your goals are a bit different and creating current income is a big part of what you want to do, than growth and income mutual funds are right for you. The risk level with these mutual funds are ranked high to moderate and they invest in common stocks with a good possibility for dividends and appreciation of your capital.

 

If your main goal is to create a high amount of current income and capital appreciation isn’t a concern, then fixed income mutual funds and equity income mutual funds would be the right choice. The risk is considered moderate to low, but the potential for current income is very high.

 

Selecting the right mutual fund for you is a very important decision. You must have a clear idea of your goals to make the right choice. Once you know your position, you can be well on your way to enjoying success in mutual fund investing.