The first thing to consider when asking the question in the title is, “How do you find the best mutual funds?” In what terms is investing in mutual funds the best course of action for you? To answer those questions means you having to define, even in the broadest sense, what your goals in investing are.
As a rule, the younger you are the more risk you can take because you have more time to weather the swings in prices associated with higher risk investments. Investing in mutual funds focused on small cap growth stocks or emerging foreign markets is one way to implement that strategy. Another strategy would be to look at an annual sector breakdown of the economy and find the best mutual funds in terms of performance and cost in that sector. Precious metals, for example, have been returning more than 10% per year since 2000 and if you believe that those returns will continue then investing in the funds that gave the highest return over that period would be a good plan.
It is never too early to begin investing in mutual funds for your future as the law of compounding numbers works to your advantage the longer it is allowed to operate. The best mutual funds in the best performing sectors of the economy will provide you will excellent returns as long as you are willing to reassess their performance annually. Markets change with time and while your investment strategy may be set for a decade, your tactics of how to implement that strategy should adapt to changes in the market, ie. Just because gold was a good investment last year does not mean it will be this year.
As one gets older the prevailing wisdom is to reduce risk and seek longer, more stable, if lower yields. The math works to your advantage there as you have a larger pool of funds to draw from at relatively fixed lifestyle costs if you have been prudent, are debt-free and have adequate medical coverage, assuming low and stable inflation. Shifting from stock funds to bond funds is one example of moving from higher risk to lower risk with more stable yield.
For the novice investor having even a cursory understanding of how and why capital flows is necessary to making the best investment choices. If you do not believe your time is well spent doing that and have the means, then seeking the advice of the professional financial planner to guide your investments is not only a choice but is recommended before buying into mutual funds with your capital.Previous Post » Opening A Stock Trading Account