How to Choose Mutual Funds
With thousands of mutual funds available, focus on a few key criteria to find the right ones for your portfolio.
Start with Your Goals
What are you investing for and when do you need the money? Long-term retirement savings can handle more stock funds. Short-term goals need stable bond funds or money market funds. Match your fund selection to your time horizon.
Prioritize Low Costs
Costs are the best predictor of future performance. Funds with lower expense ratios tend to outperform higher-cost funds in the same category. Stick with expense ratios under 0.50% for stock funds and under 0.25% for bond funds.
Keep It Simple
A three-fund portfolio (total stock market, total international, total bond market) covers most needs. You don't need a dozen specialized funds. Simplicity makes rebalancing easier and reduces complexity.
- Match fund selection to your goals and time horizon
- Low costs are the best predictor of better performance
- A simple three-fund portfolio often beats complex strategies
Answer these questions to complete the checkpoint and unlock the next one.