Choosing mutual fund investments from the thousands of fund offerings available can be daunting. With so many different categories of funds and fund families, it may make sense to work with your financial advisor. Here are some steps experts recommend you consider when selecting investments.

There are a vast number of mutual fund offerings available to choose from and the process can be intimidating even for a seasoned professional. With so many decisions to make along the way and so many factors to evaluate such as which categories of funds or fund families are right for you, it may be sensible to work with your financial advisor to guide you along the way. Here are some basic guidelines to adhere to when selecting investments.

Evaluate Your Investment Objectives Before you set out to start picking funds, you first need to step back and design a clear picture of your investment objectives and identify the time frame you have to work with. For example, you may plan to start a business in two years, to invest in your children's education in 10 years, or to fund your retirement in 30 years.

Generally speaking, the longer out your goals are, the more time you have to save and invest your money and the greater your tolerance for risk might be. If you have an investment time frame of 10 years or more, you may want to take on more risk so that you can position yourself to potentially earn more over time by investing more aggressively in stocks with good growth prospects. However, if you know your investment objectives, say purchasing a house, are less than five years away and you will need funds to cover your purchase, you may want to allocate your portfolio with more conservative, income-producing securities such as dividend paying stocks or short-term fixed income securities.

Try to match your goals with the goals of the fund you choose After you develop and clear understanding of your investment objectives with your financial advisor, the next step is to identify which mutual fund categories and types will most closely match your investment goals, risk tolerance, and time frame. With thousands of mutual funds currently available for investors, there are certainly plenty of options to pick from, whatever your goals are. But don't be overwhelmed by the endless number of funds and differentiation within those funds that are available in the mutual fund industry, because essentially all the funds can be boiled down to a several large groups. So think about your investment objectives and what you need to fill the void with in order to get you there - is it income? growth? an income-growth combination? - and then match that with the investment objectives of the fund. For instance, stock funds' objectives typically include "aggressive growth," "growth," or " growth and income" depending on the underlying securities they hold. Furthermore, each of those funds can also be categorized by a risk level such as high risk, average risk, or low risk.

Page 1 of 3 :: First | Last :: Prev | 1 2 3 | Next