--- title: How Do I Choose a Mutual Fund? description: Picking a mutual fund can be tricky. Here's how to do it. authors: - name: timestaff url: https://money.com/author/timestaff/ articles: 459 covers: - Investing - Banking - Career Advice - Credit - Credit Cards - Housing - Identity Theft - Insurance - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Retirement - Shopping - Taxes former_staff: true published: '2014-05-27T14:12:24.000Z' modified: '2024-04-02T04:35:08.000Z' section: Investing tags: - diversify - how do i choose a mutual fund - invest - Investing - investment - mutual funds - stocks canonical: https://money.com/collection-post/how-do-i-choose-a-mutual-fund/ type: Article source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![How Do I Choose a Mutual Fund?](https://money.com/img/logo-social.png) Mutual fund ads, which often tout a fund’s past performance, always include this bit of fine print: “Past performance is no guarantee of future returns.” Pay attention to that disclaimer. Not only is past performance no guarantee, it’s not even a very strong indicator of a fund’s future success. A recent study by Standard & Poor’s found that of all funds in the top 25% of their category in one year, fewer than one third made it to the top 25% the next year. Only 5% managed to stay in the winner’s circle three years in a row. So how do you pick [a good fund](https://money.com/collection-post/how-many-funds-do-i-need/)? Each year, *Money* magazine puts together a list of [50 recommended funds](https://money.com/money-50-best-mutual-funds-and-etfs-2/). Performance is one of the editors’ criteria, but it’s the least important among many. *Money* also considers: **Low fees**: If one fund charges an annual expense ratio of .4% and another charges 1.4%, the cheaper fund has a built-in 1% edge on returns every year. Remember, you can’t count on a fund manager outperforming or even making you money. But you *can* count on him collecting his expense ratio. For this reason, the Money 50 list is heavy on [low-cost index funds.](https://money.com/collection-post/what-are-index-funds/) **Experienced management**: A fund is nothing but a pool of money. If performance records matter at all, they belong to the manager not the fund. So if a fund switched managers last year, you truly can ignore most of its record. **Strong stewardship**: *Money* looks for funds whose managers consistently put shareholders’ interests ahead of their own. That means having pay incentives aligned to performance, a strong board to represent fund shareholders, and record of avoiding regulatory issues. Morningstar, a fund research group based in Chicago, assigns funds a stewardship grade based on these and other factors. You can look up a fund’s stewardship grade at [Morningstar.com](http://morningstar.com). Make sure you pick a [fund](https://money.com/collection-post/how-many-funds-do-i-need/) with a strategy aligned to your goals. Some stock funds focus on big, stable blue-chip companies with the aim of producing relatively steady returns. Others reach for higher returns—and accept higher risk—by focusing on smaller companies, or on stocks in volatile but fast-growing industries. Most stock investors, however, will do just fine by choosing a low-cost, broadly diversified fund that holds a representative slice of all the stocks on the market. ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/collection-post/how-do-i-choose-a-mutual-fund/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Investing", "item": "https://money.com/investing/" }, { "@type": "ListItem", "position": 3, "name": "Mutual Funds", "item": "https://money.com/mutual-funds/" }, { "@type": "ListItem", "position": 4, "name": "How Do I Choose a Mutual Fund?" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/collection-post/how-do-i-choose-a-mutual-fund/#webpage", "url": "https://money.com/collection-post/how-do-i-choose-a-mutual-fund/", "name": "How Do I Choose a Mutual Fund?", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2014-05-27T14:12:24.000Z", "mainEntity": { "@id": "https://money.com/collection-post/how-do-i-choose-a-mutual-fund/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/collection-post/how-do-i-choose-a-mutual-fund/#breadcrumb" }, "dateModified": "2024-04-02T04:35:08.000Z" }, { "@type": "Article", "headline": "How Do I Choose a Mutual Fund?", "articleSection": "Investing", "image": [ { "@type": "ImageObject", "url": "https://money.com/img/logo-social.png", "width": 300, "height": 300 } ], "author": [ { "@type": "Person", "name": "timestaff", "url": "https://money.com/author/timestaff/", "@id": "https://money.com/author/timestaff/#author" } ], "publisher": "https://money.com/#organization", "datePublished": "2014-05-27T14:12:24.000Z", "description": "Picking a mutual fund can be tricky. 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