The Top Ten Traits of a Great Mutual Fund You Should Invest In

by Hank Coleman

Picking a great mutual fund can be a little tricky or overwhelming at first, but it does not have to be that way. Like a great person or friend, all good mutual funds have certain qualities or traits that should always be present. There are many characteristics or traits that I look for in a great mutual fund. I always try and make sure that these attributes are present before I invest.

You should look for mutual funds that are…

  1. Outstanding long term return for the past 5, 10, and 20 years
  2. Have low expenses
  3. Have low turn over rate
  4. A specific and published investment strategy
  5. Have no sales loads (front or back end)
  6. Not too large a mutual fund
  7. Take into consideration tax consequences
  8. Well established (now is not the time to take chances on a new fund)
  9. Run by a great group of managers or principle manager that has been at the top of the fund for a long time
  10. Exhibiting high ethical standards

A couple of bonus characteristics to look for….

  • A member of Money Magazine’s Top 70 or Kiplinger’s Top 25 Mutual Funds
  • A history of sticking to its investing strategy and not drifting
  • A fund that matches your risk tolerance
  • A fund that matches your diversification

This post was originally inspired by my very first guest post on Cash Money Life, one of my absolute favorite money blogs.  I also updated some of these attributes in a post on selecting the best mutual funds.

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Ken January 18, 2010 at 7:47 pm

You are spot on with these 10…good job!

Daddy Paul January 20, 2010 at 12:17 pm

I agree with almost all of your points except in a 401K or IRA I could care less about turnover. If you are going to own a high turnover fund it should be in a tax Privileged account.

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