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Sunday, April 26, 2009

The Best Mutual Funds

From the Hoss's Mouth

What are the best mutual funds? All money magazines are often faced with this question. Some say the best mutual fund can be found by researching the fund manager, others say to compare the fund's performance with similar funds, and still others advise the investor to compare a selected fund with its benchmark fund.

best mutual fund

One thing is for sure, choosing which mutual fund(s) to invest in is about as easy as picking a husband or wife. They come in all shapes and sizes with various forms of advertising and you have to be extremely careful what choice you make. Sure you can have lots of fun along the way, but if you make a bad decision, it can cost you a lot of money. (P.S. The Hoss made a great choice in Mrs. Hoss) (P.S.S. Mrs. Hoss told me to say she made a wonderful choice.)

The Hoss believes the best mutual fund is the one that puts the most amount of money in your pocket. Just like the best spouse is the one who puts the most love in your life (but of course, I have only ONE spouse; no one can compare to Mrs. Hoss).

The Hoss must point out that analyzing mutual fund performance is intricate and can be very intimidating. You will come across advertisements claiming so and so fund is a "gold star fund." Or the number one fund in the past six months with returns of 40%. If the investor was to believe all the hype, s/he would be of the opinion there are hundreds of funds available which provide great returns. But we know better. You don't pick a spouse by what they wear on the outside, but by what they have on the inside.

A mutual fund's past performance is definitely not a predictor of future results, but careful thoughtful study of past performance will provide some indications of the true quality of a mutual fund. In a lot of cases, you will find that many mutual funds do not regularly deliver the returns their advertisements suggest. Just like a well-dressed man or woman may not be as good a mate as one dressed in grubby jeans and a T.

In his next post, The Hoss will show you how to avoid the pitfall of "annualized return" and how to calculate a mutual fund's actual total return. He hopes this will help you select the best mutual fund. You're on your own when it comes to choosing a mate.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: May 03, 2009
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