How to pick a Mutual Fund

Picking a mutual fund could seem complicated because there are many to choose from, but let’s make things simple. At the 30,000 foot level, funds divide into growth funds that invest in stocks and bond funds that invest corporate and/or government bonds. Over long periods of time, stock funds provide higher rates of return in exchange for more price fluctuation. A common choice is to invest in an index fund like the S&P 500. An index fund will mirror the index and spread the investment into 500 different stocks offering great diversification. Most index funds offer lower costs and management fees because they attract large pools of money and are not actively managed. Growth index funds also offer good long-term returns that help the shareholder grow their accounts. Several funds offer low initial investment, thus, investor’s with limited budgets can participate. By owning an index fund and investing a dollar a day, anyone can use the power of compound interest to provide financial security for themselves or someone they love.
