Buying Mutual Funds - How To Pick The Right Fund

Many investors are buying mutual funds to secure retirement. Even though retirement may be a long way away, mutual funds are a great way for young investors to secure their future early. If you have a lot of money saved up, this might be your best investment vehicle.

If you want to get involved with buying mutual funds, you will need to do a lot of research. This isn't a get rich quick scheme. You need do your homework before engaging in this type of investment.

To find mutual funds, you can use the internet or go to your local library. There are many mutual fund directories (Morningstar Report or Value Line). They track and offer all the information on thousands of mutual funds. Try www.morningstar.com and www.valueline.com.

You will need to read the prospectus, a detailed explanation on a particular investment, of the funds you are interested in. Then you must ask yourself these key questions:

"How has it performed over the last five years?"

"Is it considered risky?"

"What are the big magazines and CNBC saying about the fund?"

Measuring the risk/reward ratio to correspond to your risk taking level is an important process when you are looking for the right fund for you.


So now you have examined all the information; you have found the best mutual fund and you are ready to take a dive into it. Now you decide how you want to buy the fund. You can either call a stockbroker or go directly to the mutual fund.

Online brokers are very popular these days. They make it as easy as renting a video on Netflix. If you do choose to go with an online broker, they will provide you extensive research information on their website. You will be able to review all the data your eyes can see, and if you are still worried, just make a call and talk to someone from their Customer Support.

Here's a list of online brokers you can trust:

* E*Trade Financial - www.etrade.com

* Charles Schwab & Co. - www.schwab.com

* TD Ameritrade - www.ameritrade.com

* Scottrade - www.scottrade.com

After you've given all your information and the mutual fund company has opened the account for you, all you have to do is tell them you would like to buy ABC Mutual Fund. They will tell you exactly how much it will cost, and you state whether or not you want in and how much money you want to invest. After that's all said and done, you send your check to finalize the deal.

After buying the fund, you'll get a statement every month of how well it is doing. It will include what income has been paid out in the fund, whether more shares have been purchased, the price of the fund today, the share price of the fund when you bought it, etc. You will get an annual statement at the end of the year, and you will have to file your gains in taxes (they will send you a 1099 form to use when you prepare your tax return).

Buying mutual funds can be a great way to increase your net worth as you grow older, without having to work extra for the money. If you want to retire wealthy, buying mutual funds will keep you on the right track. Remember, it is important to diversify your investments; so don't put all of your money in mutual funds alone.


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