The following questions will help you make an intelligent choice.
How long has the fund’s management team been in place?
How much experience do they have? This information is in the fund’s prospectus and sales literature. If you don’t see it, call the company or sales representative and ask. Look for teams with long and successful track records.
Have I read the prospectus thoroughly? Although the language may be dry and technical, don’t get discouraged. You need to know the minimum investment, fees and expenses, and investment strategies and risks. When you invest, the fund company will assume you have read and understood the prospectus, so the time to ask questions is before you invest.
Do the brokers or customer service representatives answer my questions clearly? Are they easy to work with? Does the fund company make educational resources available to me? Is the company’s service helpful and courteous? A good working relationship will help you feel comfortable with your investments.
Are the expenses reasonable? Cheaper isn’t always better, but
high management fees or loads can erode your profits.
What is the past performance of this fund? Don’t be swayed by last month’s hot fund. Check on how the fund has fared in both up and down markets. Look for funds that have performed well over a long period of time — a minimum of three to five years — bearing in mind that past performance is not a guarantee of future performance.
Does the company offer financial-planning services? Some companies offer one-on-one advice from a financial planner or registered representative. If you don’t need assistance, consider no-load funds that you buy directly from the fund company.
Don’t Forget…
There are no guarantees when investing in mutual funds. Shop wisely and use careful judgment. Get professional advice if you feel you need it. Become an educated consumer. You can learn a great deal from reading investment books, investment magazines, and newspapers. Annual and semi-annual fund reports are available online, at the library, or directly from the company. And, of course, before you invest in any mutual fund you need to read the fund’s prospectus and ask the company for a Statement of Additional Information (SAI or Part B of the prospectus) if you want more in-depth information.
