How To Find The Perfect Mutual Fund And Where To Begin

by Hank Coleman

Mutual funds have become extremely popular over the past 20 years and are now a part of investors’ everyday lives. More than 80 million people, or one half of all American households, invest in mutual funds. According to Lipper, Inc. there are over 10,000 mutual funds in the United States and account for $11 trillion of America’s investment nest eggs. With numbers like those, it is no wonder that people are overwhelmed when starting to invest. But, we must invest in order to have the retirement of our dreams. So, that begs the question, where do we find a great mutual fund to invest in? Where do we start?

I love to pick my own mutual funds to invest in. Now, do not get me wrong, a predominant portion of my retirement savings is invested in index funds that mirror the large indices in America and around the world, indices such as the S&P 500, the Wilshire 5000, Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index, etc. But, there is a great rush when you find a company and mutual fund that you love who gives the stock market and index funds a run for their money. Two great sources that I love to use to help me narrow down actively traded mutual funds is Kiplinger’s Top 25 Funds and Money Magazine’s Top 70 Mutual Funds lists. This month’s Kiplinger’s magazine has their updated listing for 2010, and there are some great funds in there. I am proud to say that I have own several of them for years. These two lists are definitely a great starting place.

Five Places Help You Invest In Mutual Funds…

1. Your Local Bank. I bank with a large national bank, and they offer investment advice and services. By opening account through their brokerage arm, I can then begin investing in mutual funds through them. My bank is essentially the middleman in the transaction. Be careful of high fees when you go this route. Read the fine print. Some banks even have their own mutual funds. Just be careful in that scenario as well that you are buying the best funds available.

2. ING Direct. ING Direct is a leader in online savings accounts with its Orange Savings Account. ING Direct bought Sharebuilder.com discount brokerage several years ago. And, now you can buy stocks and mutual funds through these two great companies.

3. Invest Directly. If you find a mutual fund that you like from a source such as the Money 70 or Kiplinger’s Top 25 Funds, you may be able to skip the middlemen all together and invest directly with that mutual fund company. That is what I do with almost all of my family’s mutual fund investments. Every major fund management company has a dedicated staff, 1-800 phone numbers, and excellent websites were you can purchase shares, transfer funds, and make withdraws all from the comfort of your living room in your PJs and slippers. The hardest part is finding which mutual fund to invest in.

4. A Discount Broker. Many discount brokers such as Scottrade also offer the opportunity for its customers to buy and sell shares to mutual funds on its trading platforms. Despite a majority of its business coming from the individual stock buying and selling, discount brokers can offer a good alternative to help you locate those hard to find mutual funds. Some mutual funds actually only sell through a broker and not directly to an individual over the phone. So, services like these can be essential to getting in on a great mutual fund company, but be careful of expenses.

5. Morningstar. Morningstar, Inc. is the leading provider of independent investment research. Morningstar provides reports and information on stocks, mutual funds, and similar investments. With Morningstar’s free membership, you can track your investments, access daily market news and commentary, view snapshots on your investments and potential investments, and interact in their investor forums to find the best mutual funds and also stocks to invest in as well. Through Morningstar you can get investment ideas that matter from their top analysts including stocks, mutual funds, and ETFs. Or see what investments pass your test using the site’s stock screeners and Morningstar ratings.

Mutual funds are more popular than ever, and they are the backbone of a majority of Americans’ retirement nest eggs either directly or through index funds and 401-k retirement plans. But, the prospect of investing in mutual funds does not have to be completely daunting. It can be done, and it is incredibly easy to start. There are many avenues for you to invest your money such as the vehicles listed above. The hardest part is just starting. I urge you to start looking into investing in mutual funds as soon as possible if you have not done so already.

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