more. Markets will always go up and down and you need to be aware of the possible risks which your mutual fund may have, for example inflation risk, interest-rate risk, credit risk, liquidity risk, currency risk and political risk.

4. Performance of the mutual fund in the past

The performance of your mutual fund in the past will give no security for the future but it is always a good indicator of the evolution in different market situations. It is relevant to compare the performance over the last three years with these over the last 10 years. Long time statistics are more relevant to know the impact of inflation, deflation, recession and even a stock market crash. It may happen some mutual funds reach better returns in times of inflation or any other economic situation.

5. Fees and expenses

The fees and expenses of mutual funds are to find in the prospectus of your mutual fund. Most mutual funds have purchase fees of 2% but it may happen you can buy mutual with lower purchase fees or some deductions if you invest for a minimum amount in this fund.

It is also possible you can get lower fees if you invest through systematic investment plans or it is possible that your purchase fees will be replaced by an exchange fee. An exchange fee is lower than a purchase fee and is possible for certain mutual funds which you exchange to another fund in the same group.

Sometimes you need also to pay an account fee if you buy a mutual fund. These fees are often imposed for maintenance of your account or if the value of your account is too low. These fees vary from fund to fund and it is important to check them and you must decide if these fees are acceptable for you; otherwise you may select another fund with lower fees.

6. The fund manager

The fund manager is the person who manages your fund. He will decide to buy and to sell stocks and bonds in your fund with the intention to reach a high return but according to the strategy of the fund. It is wise to do some research of the background of your fund manager. The Securities Exchange Commission (SEC) has information about every fund and his manager. It may happen that the manager of a fund has changed recently which doesn't mean always you will have a better manager. It is important to check his results in fund management.

Mutual funds are popular because it is an easy way for diversification in your investments. You need to ensure your funds goals are similar with your own goals and that you follow up your investment portfolio. It is possible your goals change over time and you need to reevaluate your investment portfolio. Maybe it is wise to read reviews of your fund before you decide to buy mutual funds.

Investing in mutual funds is often a wise decision but you need to be aware of the risks and if you can afford to take these risks. It is often the best decision to start with balanced funds and after some experience you will know which investments strategy will fulfill your needs.

Learn more about this author, Erik Van Tongerloo.
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