Heike Moeller February 24, 2020 Mutual Fund
Create a plan Define your financial goals. Are you saving for retirement? Putting money aside for a home? Funding a child`s college education? Your answer will have significant implications on your choice of mutual funds. More time gives you flexibility to use an aggressive approach. Immediate needs call for safety and capital preservation. Take careful consideration of your tolerance for risk. If the market dips, at what point would you lose sleep? Is it a 5% drop? 10% drop? An asset allocation plan will balance your portfolio and maximize return for your level of acceptable risk.
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Watch for a solid record of returns, rather than funds showing spurts of great years followed by fits of lousy ones. Compare the funds returns to a relevant benchmark index, (large-cap vs. S&P 500, small-cap to the Russell Index, etc.) Solid funds should not only consistently beat the benchmarks, they should also beat their peers.
One way around the round-trip trap is instead of buying the same fund back (because now that energy fund is going up again) is to buy a similar fund from a different mutual fund family; in other words switch from ABC fund company to XYZ, as an example.