The best bond funds and best stock funds have two things in common. One thing could be excellent investment performance, since you invest money in stock funds to get growth and in bond funds for higher income or dividends. Then again, investing is rarely that simple.
Past performance figures are readily available. That’s the good news. The bad news is that past performance is not a good predictor of future performance for mutual funds in general. And future performance is what you invest money to get.
Last year’s best performing stock funds can be losers when economic or market conditions change, and change is the norm. Bond funds that pay the highest dividends take risks that many investors are not even aware of. For example, high yield funds invest in low-quality bonds and are often referred to as “junk” bond funds in the business.
So, what two factors can you get your arms around when looking for the best funds to invest money in? First, look at the reputation and track record of the investment company or mutual fund family that offers and manages a fund. They should be well-established and offer a broad array of funds to choose from. Every fund should tell you when it was established in its literature.
Ask for free information. Get a guide to all the funds a mutual fund company offers. There should be numerous stock funds and bond funds to choose from. Plus, some balanced funds and money market funds as well. Some funds should be well established, while others might be but a few years old. Their largest funds should manage well over $1 billion in assets. You’re looking for stability and a track record here before you invest money.
While you have the mutual fund info in front of you, move on and look for the second thing you need to know to pick the best stock funds and best bond funds. Every fund must show you what it will cost if you invest money. You can’t predict future performance, but you sure as the devil can get a handle on sales charges, fees and expenses.
These numbers are laid right out for you if you look. For example, one stock fund might have sales charges of 5% that comes right off the top when you invest money. Plus, yearly expenses and other fees could nail you for 2% a year. Another might have no sales charges at all, and have total expenses of less than 1%.
Don’t throw your money away. High charges, fees and expenses are NO indication of quality. The best funds in the country offer low-cost investing and a good track record for reputation and integrity.