A mutual fund is a great way to invest in the stock market without needing a large amount of cash to get started. A mutual fund also offers a terrific way to diversify your portfolio if you are an individual investor. Over the years mutual funds have multiplied and there are now thousands of mutual funds available for purchase. That isn’t necessarily a bad thing, but it does mean you need to do your homework before you purchase a fund.

Three Steps to Take Before Purchasing Mutual Fund Shares

1. Determine Your Objective- If you don’t know what you are looking to do with your money, there is no way to research mutual funds properly. Consider your personal financial situation and what you need this mutual fund to accomplish before you even start researching where to put your money.
2. Consider every single fee or expense that will be taken from your account-  There is a huge difference in the fee levels of mutual funds, and if you don’t find a fund with lower expenses you are really hurting yourself. Avoid funds with any kind of load, and make sure the annual expenses are less than the category averages. Remember, fees and expenses will quickly eat away from your earnings if you allow them to.
3. Mutual Fund Performance- The upside to having so many different mutual funds to choose from is that you should always be able to find a solid mutual fund that has a great track record on performance. Many investors simply look at what the fund has done in the last few months or year, but I think it is much wiser to look at the three, five, and ten year averages for mutual fund performance.

Buying a mutual fund is a good idea for most investors, but before you jump in with both feet make sure you take these three steps. These steps will help ensure that the fund you purchase is the right fit for you.

Investing in mutual funds is a very popular thing to do for many investors. Mutual funds make a lot of sense for a large section of the population since they allow you to quickly pool your money with other people’s money and receive professional management and great diversification of your investments. Before you invest in a mutual fund, you should always do your own research as to which fund is worthy of your investment. I have compiled a list of five sites that are great to use for mutual fund research purposes.

Top Five Mutual Fund Research Sites On the Net

1. Morningstar.com – For quite some time now Morningstar has been considered the gold standard in mutual fund research, and for good reason. Morningstar has dozens of analysts in all of the mutual fund fields that are specifically trained to follow every move that the mutual fund managers make and take note of every correct and incorrect step they take. Compare mutual funds in the click of a mouse at this site with no problems. Morningstar mutual fund ratings are also available for free to the public. The broadest offering of mutual fund research is here.
2. Yahoo Finance – The Finance site at Yahoo has always been one of their stalwarts and the mutual fund page is definitely very useful. The mutual fund screener is dynamic, and completely free to use. Yahoo also has an easy way to track the top 10 holdings of each mutual fund in daily trading.
3. WSJ.com – Wall Street Journal Online is often overlooked for mutual fund research, but I find the site to be very useful. The site is great at ranking which funds perform well vs. their peers over the short and long run, and the mutual fund charts here are above average.
4. Kiplinger.com – Kiplinger Magazine is much more focused toward investments such as mutual funds versus individual stocks, and the website also has some great information. Kiplinger has a list of its favorite mutual funds, which it calls the Kiplinger 25, which have outperformed the market nicely in the long run.
5. Fool.com – Motley Fool is a good website to use to understand the basics of mutual funds as well as the catches of some mutual funds. The Fool does a great job of showing investors what to avoid when looking for great mutual funds.