How to Pick A Mutual Fund

Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Manny Schiffres, the Chief Investment Editor of Kiplinger's Personal Finance Magazine to talk about Mutual Funds. Manny, there are thousands and thousands of funds, how does a beginning investor begin to pick the right fund for him or her.

Manny Schiffres: Kevin, it depends what you want from a fund. If you are looking for income with low risk, look at money market funds. If you are looking for aggressive growth you look at stock funds. If you looking for maximum growth you may look at foreign stocks funds or a highly leverage stock funds, so you really have to start with what your goal is.

Kevin McCormally: Manny, how important is past performance when you pick a fund. We are always told that past performance is no guarantee of future but should you go look at that when you pick a fund.

Manny Schiffres: Well, what you are going to do. Look at the worst performing funds, of course, you are going to look at past performance, but I do, rather pick funds that have consistently above average results year in and year out rather than funds that may have for example, the best 10-year record in their category. Because one or two good years may have been responsible for that good record and it shows a fund that somewhat inconsistent and you may just catch it when it's on its downward slope.

Kevin McCormally: Okay, finally couple of other key points we should look at when we pick a fund?

Manny Schiffres: Well, you want to take a look manager tenure. If you look at a fund that has a great long term record but a new manager took over a year ago, the long term record is irrelevant. You also want to take a look at the funds assets. If a fund achieved its greater record when it was small and now it has 20 billion dollar in assets, it maybe hard to replicate those returns in the future.

Kevin McCormally: Okay, thank you Manny.


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