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How to Choose a Mutual Fund

With thousands of mutual funds available, choosing some for your own portfolio takes serious consideration. There are a huge variety of fund types, each differing in investment objectives, makeup, and style. Your first task is to formulate your personal investment objectives and identify your risk tolerance level and time frame. Next, you should identify the fund categories that seem appropriate to your investment objectives. Then, look closely at individual funds in each of the categories by reviewing performance, consistency of fund management, investment policies, and variability in returns over time. And don’t forget to factor in fees and expenses. Much information about a fund is disclosed in its prospectus. Additionally, major analytical services such as Standard & Poor’s, Morningstar, and Lipper Analytical Services provide statistical information on mutual funds and can prove invaluable in deciding which funds to select.

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