What is the best way to pick a long term mutual fund?

I am a 25 year old looking to invest 10K in mutual funds. I am not planning on touching it for many years to come. What is the best way to pick a long term mutual fund?

Index fund.

I would open an account with an investment management firm. I am opening a ROTH IRA account with T. Rowe Price. The advantage of having a roth IRA over a normal mutual fund is that it is not taxed every year and you can still withdraw from the fund if you have an emergency and it is a retirement acount set up for you. T. rowe has many no load mutual funds available. Many of their mutual funds are rated 4 or 5 stars and have large growth up to 20% within 10 years. You can check out their website and answer their screening questions to see what options are best for you, more than likely you will be directed to growth mutual funds because of your age. There are other companies like Fidelity or Vanguard you could look into as well.

2 things:

1) A generic equity fund with a superior long term record from Vanguard, Fidelity, or T. Row Price, like Equity Income. What seems to be a hot flavor at the moment will be garbage in a few short years.

2) It's not the fund that makes you money - it's what you do with the fund. Most people get jerked around too much by fear and greed, and THEIR returns in the find are LOWER than the FUND's returns. You really have to commit to a fund for many years and it's always easier to do with a generic fund.

Just let me pick them for you (I am a Portfolio Manager with over a decade of experience in the Stock Markets)

Hello David,

I can explain how to help you find the best mutual funds by listing some of the factors that I look at when evaluating mutual funds. Some of the factors include historical performance, expense ratios, consistency of performance, and probably most importantly, the background and experience of the portfolio mangers and analysts that support the mutual funds. I tend to be very selective when it comes to investment experience and educational background. You do not necessarily have to pay more for a higher quality mutual fund manager, so why not pick mutual fund managers with the best credentials.

The other issue you should consider is which are the best mutual funds for you. The best mutual funds for you may not be the best mutual funds for someone else. Some people prefer value mutual funds while other people prefer growth mutual funds. Volatility is also a very important consideration. Some people do not mind volatile funds if the returns justify the higher risk while other people are not comfortable with mutual funds with high volatility.

There are many good mutual fund companies. I am most familiar with no load mutual funds based in the United States so I can provide you with a few no load mutual fund companies such as Vanguard, T. Rowe Price, Fidelity, Dodge & Cox, Royce and Metropolitan West. No one mutual fund company is the best at all investment strategies. T. Rowe Price is very good at domestic equity strategies while Royce specializes in smaller cap value investments. For fixed-income, Vanguard, Metropolitan West, Fidelity and T. Rowe Price are all very good.


I hope this helps.

Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net