How to Keep Your Mutual Funds Safe

The terms and options may be daunting, but mutual funds are a fairly safe choice for beginning investors. Like in all investing there are risks involved, but knowing how to pick your mutual funds and choosing a reputable broker will help you see the greatest return on your investment.

Become familiar with the areas in which your mutual fund has invested. Start by asking a few questions about each field. Is this field in the news? Have stocks associated with this industry taken a particular hit or had a breakthrough recently?

Do some research on your mutual fund investor. How have his/her funds done in the past? Make sure he or she is available to answer your questions.

Learn to read your quarterly reports.

Check each quarterly report for areas that might be too heavily funded. Spreading your investments through different fields creates a diverse portfolio and can help maintain your profits.

Talk to your manager or broker if you have concerns.

Focus on fees. Make sure your fund hasn't suddenly added or raised fees for investors.

Make sure your questions and concerns are being addressed. Good fund managers or brokers will always have time to respond to your queries in a timely fashion.

Tips & Warnings

• Know what you are looking for in a mutual fund—figure out how much of a risk you are willing to take and stick to mutual funds that fall within your parameters.
• Decide how much you want to invest and for how long. Set benchmarks that your fund must meet (a certain amount of profit per quarter, for example). If your fund does not meet a benchmark, consider dropping it.
• Don't let yourself be pressured into higher-risk or higher-cost funds by an overzealous manager.
• Mutual funds are not simply higher-yield savings accounts. Although generally low, there is risk involved and you may lose money, so don't overinvest. Neither should you expect too much from your mutual fund. A little research into the fund will let you know what kind of returns to expect.
• Mutual funds may contain hidden costs covered up by confusing terminology. Letting another person handle your money is always risky; get to know the reputation of the fund and the fund manager.