The world of mutual funds can be confusing. With more than 9,000 funds on the market, how can you choose the ones that are right for you?
You could start by considering the various categories of mutual funds: Small Cap Growth, Large Cap Growth, Large Cap Value and many more. You might think you should consider the best-performing category. But things change rapidly in the mutual fund world – last year’s top category could become one of the worst-performing this year, and vice versa.
Instead of trying to chase performance, look for a mix of funds across a range of categories that reflect your goals, risk tolerance and time horizon.
Mutual funds are popular, and for good reason. Because each fund generally contains dozens of securities, you can get more diversification than you typically would from individual stocks or bonds. Just remember that as you build your mutual fund portfolio, don’t get caught up in last year’s results – because old news just may not be that relevant today.