- What is a mutual fund?
- Who runs a mutual fund?
- What are the advantages of mutual funds?
- What types of mutual funds are there?
- What kinds of funds are best for retirement?
- What kinds of stock funds should I consider?
- What's a stock index fund?
- What makes an index fund so great?
- What's a bond fund?
- Bonds vs. bond funds: Which is better?
- What's a money-market fund?
- Is there a single no-brainer investment?
- How much do mutual funds cost?
- With fund expenses, how high is too high?
- Which is better, a load fund or a no-load fund?
- How can I tell if a fund is a good performer?
- When should I sell a fund?
Say you send two teams of runners out to run a marathon, but require one team to carry 25-pound backpacks. Which team do you think is likely to have the better average time?
A fund's expenses are like those backpacks: They can drag down your total return. By contrast, a mutual fund with low expenses will have an easier time delivering you solid returns. So you want to make sure you choose a fund with an "expense ratio" - the annual cost of owning the fund, divided by your investment - that's reasonable.
What's reasonable? It depends on the kind of fund. Index funds should have the lowest fees, because they cost relatively little to run. You can easily find an S&P 500 index fund with an expense ratio of less than 0.2%, for example. For mutual funds that invest in large U.S. companies, look for an expense ratio of no more than 1%. And for funds that invest in small or international companies, which typically require more research, look for an expense ratio of no more than 1.25%.
