How to Choose a Mutual Fund Family

Mutual funds are part of a family of funds created by one company. It is important to use the same fund family when investing to get break points, smaller fees, on the money invested. Different asset classes and types of funds allow you to tweak your investment for the market conditions, without new sales charges. You can choose a good mutual fund family by looking for a few key elements.

Check for asset classes. The fund family may have 100 funds and yet not have the 3 main asset classes. Stocks, bonds and cash or fixed investments are necessary to create a good portfolio.

See if they have all types of stock funds, both U.S. based and international. No particular types of stocks perform well all the time. Usually small cap growth funds will perform well under different conditions than a large cap value fund. In order to balance a portfolio you need to have a little of everything. You won’t make an overnight fortune, but you won’t lose one either.

Investigate the selection of bond funds. Different types of bond funds perform differently, just like the stock funds. A high yield bond fund tends to perform the opposite of a long-term government bond.

Look at the 10-year return. If very few funds of a specific asset class have a 10-year return find out why. Many companies that have poor return histories will drop old funds and create new ones so the returns look better.

Be aware that a fund may have a higher yield even though there are fees. No load funds can be great but if you have to pay a fee, and yet make more money, the fee is not a bad thing.

Look for ratings. Several companies rate mutual funds. Ask the company representative how many 4 and 5 star funds the family of funds contains. When you choose a mutual fund family this is important information.