There are thousands of available mutual funds for investors. It can be overwhelming trying to find the best ones for us. Here are my tips that I’ve learned over the years to keep it simple.
First, the number of available funds will be cut down significantly if you have a job due to what is available in your 401k fund. There is where most of us come into contact with mutual funds. You will only have so many choices. From those choices look at the returns but only look at the longer year records like the 5 and 10 year returns. Do not focus on the 1 year returns! Anyone can get lucky. What you want to see is a longer track record of success therefore look at the 5, 10, and even lifetime returns.
Next, look at the expense ratio and choose the fund with the highest returns and the lowest expense ratio. Look for funds that have less than 1% expense ratio.
That’s pretty much it.
What I predict you will find is that you will land on growth stock funds as the category with the highest returns. Within this group the highest returns and the lowest expense ratio will probably be an index fund like Vanguard’s S&P 500 fund. That is a great fund that basically has you place a bet on the U.S. economy. That is a great bet going forward.
Warren Buffet famously used the Vanguard S&P 500 to win a bet against a hedge fund manager over who would have the higher returns after 10 years. It wasn’t even close.
So, get to investing. Don’t let the number of funds available freeze you into inactivity. Keep it simple by looking to maximize your returns while keeping your fees low.
That will lead you to where you want to be over the long-term!
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Patient and Disciplined Saving 