Lux Investing

What are the precautions to be taken before investing in mutual fund?

Public Comments

1. Be sure it is a genuine mutual fund, traded actively or be cautious and only invest what you can afford to lose. Good luck!
2. look into various ratings as put out by morningstar.com Determine your risk preferences since some mutual funds are riskier than others.
3. Check the expense ratio of the mutual fund. 1.5% is about average. Check the turnover of investments. Many mutual funds churn their investments which means they may pay hefty capital gain distributions and you will be giving most of your gains to the tax man. Check the long term return of the fund verses its benchmark. Most mutual funds do worse than their benchmarks about 70%. Check how long the manager of the fund has been with the fund. If he is a new guy on the block, history may be meaningless. Check the Moringstar rating. A good overall indicator. 4 strars or above is good.
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5. Check the fees