The key to investing is to diversify. The best-diversified investment is a mutual fund. The way a mutual fund works is the fund manager selects a huge assortment of stocks to make up the fund. Therefore, it is an easy way to invest money in a variety of individual companies. In general, different mutual funds perform differently based on the market sector they are a part of and the “luck” or talent of the fund manager.
Given this, how do you select a mutual fund for you? Whether it is for your children’s college education, retirement or even shorter-term investment goals, mutual funds are consistently one of the best investment options. Still, they are not all created equal.
I wanted to share with you a fantastic free tool that is out there to help you make the decision easier. The website is www.morningstar.com. I learned about them through my mutual fund company. They have a free membership that only requires you to input some basic information. When you register, they will ask you for additional detailed data – but you DO NOT have to give it to them. All they actually need for your membership is your name, zip code and email address.
Once you register, the best page to view is the tools. These tools will help you easily compare different funds and their performance. You can look at them individually or as categories. Morningstar also has a rating system and it is fast becoming a common indicator of a funds performance – so much, that you may even see it advertised as part of a mutual fund.
There is tons of data here, but the tool is simple. Play around with it. Some tools require premium membership, but many of the basic ones do not. My favorite tool is Fund Ranker. You can evaluate the top mutual funds this way. It is great tool when you are just getting started, or shopping for a new fund.
If investing is a hobby or passion for you, it could be worth your while to upgrade to the premium membership. For the average person though, the free tools can help you make some sense of the confusing world of mutual funds.
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