Making smart financial decisions is essential for achieving success in the long run. When it comes to investing, it's important to be aware of the different options available and to choose the one that best suits your needs. Bankrate has been helping people make informed decisions for more than four decades, and now it's time for you to take the next step. When selecting a fund to invest in, there are several factors to consider.
It's important to be aware of the fund's turnover rate, which is the frequency with which the fund manager buys and sells securities. High levels of turnover can create taxable events, so if you're investing in a taxable account, this could have a significant impact on your returns. It's also important to choose a broker that will help you learn more about a fund before investing your money. Depending on your age and risk tolerance, you should adjust your asset allocation accordingly.
For example, if you're 40 years old, you should have approximately 70% of your assets invested in stocks and the remaining 30% in bonds or fixed-income investments. When investing in mutual funds, it's important to look for companies that are undervalued based on their fundamentals. Morningstar has adjusted its mutual fund rating system many times throughout its history to account for changing factors in the investment landscape that affect performance. Additionally, if a portion of your investments made big returns and now represents a larger share of the pie, you might consider selling part of the profits and investing another portion to regain balance.
It's also important to be aware of alternatives to mutual funds, such as exchange-traded funds (ETFs). When buying fund shares, you pay an initial charge fee from the initial investment, while a fund charge fee is charged when you sell your fund shares. Additionally, because you can buy mutual funds for dollars and not for stocks, you can invest as much or as little as you want (as long as you meet the fund's minimum investment). Finally, buying investment funds with managers who have a strong investment philosophy and a track record of long-term performance is one of the best ways to achieve investment success.
Alana Benson is an investment writer who covers topics related to socially responsible investment and ESG, financial advice and investment for beginners.