About this time every year, the personal finance magazines will conduct an annual ritual: As to how mutual funds have performed in the past, and Yeara then use that information to suggest that the investment funds you should choose for next year. Unfortunately, this work is a complete waste of time.

ITA in Zaragoza (mostly) the class, stupid

The choice of an investment fund, all the research data show, it is actually very easy and simple. Most of their performance depends on the asset class to select. In other words, the biggest, most important, and most importantly decision to make is whether you want to put money in stocks, bonds, money market accounts, real estate, or some other kind, such as international stocks.

The cost is the second factor to consider

Within a certain class of investments, including stocks, research shows that The most important characteristic that determines the goodness of the investment is the expense ratio charged by the management company mutual funds. For example, if a company mutual fund charges you 2 percent of its fund balance to manage your investments and other company will charge a .2 percent, almost invariably, investment funds lesser burden of cost will do better over long periods of time.

Asset allocation for lazy

When you understand the importance of asset allocation and investment costs, taking a mutual fund is reduced to two simple questions. The first question is how Want to distribute your money among stocks, bonds and other investments.

Typically, you want to have most of their money in the long-term investment in shares, a portion in bonds to reduce volatility in your portfolio, and some of its money-perhaps founded his day of rain in something like a money market account.

The second issue has to focus on selecting a mutual fund is the expense ratio. Fortunately, the Internet and links Money allows you to more easily reach to prospectuses of investment funds, and these materials provide information regarding costs. Here is where you want Start and finish-your investment probably in mutual funds. Almost canÂ't win if you choose an investment fund with a very high cost. Almost canÂ't lose if you choose an investment fund with a very low cost.

Why not try to beat the market?

Let me also briefly address the issue Search for a fund manager's investment generates returns above the average. Clearly, some mutual fund managers, over time, have produced yields extraordinary returns so high that more than offset even large expense ratios. The point that needs to understand, however, is that if you choose to for a mutual fund star artist, you have to do now is to identify someone who is going to be a star in the next two or three decades, not someone who has been a star in the last two or three decades. Long-term investments means that you are looking for several decades in futureÂ, even if you are retired.

Note also that someone performing well last year does not indicate that you are performing this year. Repeatedly, studies have shown that past Yeara Quartera past or not this hot performer Yeara performer or fashionable Quartera's.

Putting my money in my mouth is

Here is my personal investment strategy. I am a firm believer in index funds. Since the mid-1908s and through the 1990s, I spent almost all my portfolio (perhaps 95 percent or more) in the wider provision of equity index funds available to me. In late 1990, after the market values became clearly overrated (I said it in print in books like millions Kit (Random House, 1999), I started using index funds balanced (both the stock and bond index).

Seattle tax CPA & author Stephen L. Nelson wrote Quicken for Dummies and more than 100 other books as well. Nelson holds an MBA in Finance and an MS in taxation. He also edits the do-it-yourself s corp web site.

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