How to Choose the Best Mutual Fund
With so many mutual funds to choose from, how can you pick the best one?
There's no easy answer when it comes to finding the best mutual fund. However, by doing your research and being mindful of your investment goals, you can put the odds in your favor. Pay attention to fees, past performance, and the fund's investment strategy to help you make the best decision for your needs.
Don't trust mutual fund labels - they could be misleading!
There are at least 1,022 different All Cap Value mutual funds and at least 5,992 mutual funds across twelve styles. Do investors need 499+ choices on average per style? How different can the mutual funds be? With such a large number of mutual funds available, it can be difficult for investors to decide which ones to invest in.
All Cap Value mutual funds are a great way to invest in a wide range of companies with differing risk profiles and performance outlooks. With over 1,000 to choose from, there is sure to be an All Cap Value fund that meets your investment needs.
There is a clear difference in performance between the different mutual fund styles. Large Cap Value funds have the best stock selection, while Small Cap Growth funds have the worst. This difference is significant and investors should be aware of it when choosing a fund.
Don't get stuck in analysis paralysis!
I think the large number of style mutual funds hurts investors more than it helps. It is difficult to manually conduct a deep analysis for every fund, and this exposes investors to insufficient analysis and missing profitable opportunities.
As Figure 1 demonstrates, there is a top-rated mutual fund for each investment style. This means that whether you're looking for growth, income, or value, there's a fund that can help you reach your financial goals.
We believe that the best mutual fund in each style is the one that meets the specific needs of investors.
The best mutual funds exclude those with total net assets (TNAs) of less than $100 million, as they lack the liquidity needed to be viable investments. This is a smart move, as it protects investors from losing money due to lack of liquidity.
Looking at the mutual funds in Figure 1, it is clear that DWS CROCI Equity Dividend Fund (KDHTX) is the best performing overall, followed by Legg Mason Franklin Global Dividend Fund (LDIFX) in second, and Royce Small Cap Special Equity Fund (RSEIX) in third. Virtus KAR Small Cap Value Fund (VQSRX) ranks last in performance.
How to Avoid the Dangers of the Internet
Before investing in a mutual fund, it is important to know what securities it holds. This information can help you determine whether the fund's investment strategy aligns with your own investment goals.
As an investor, you should always be aware of the risks associated with any investment. Buying a mutual fund without analyzing its holdings is like buying a stock without analyzing its business and finances. If the fund holds bad stocks, the performance of the fund will be impacted negatively.
The fund's holdings are a key determinant of its performance. Fees also play a role in how well the fund performs. The net performance of the fund is the difference between the two.
Investors can now find funds rated by their holdings.
I am impressed with the DWS CROCI Equity Dividend Fund (KDHTX). Not only is it the top-rated All Cap Value mutual fund, but it is also the overall top-ranked style mutual fund out of the 5,992 style mutual funds that I cover. This fund is a great choice for investors looking for a high-quality, diversified mutual fund.
The Attractive rating for the Virtus KAR Small Cap Value Fund (VQSRX) is based on its strong performance relative to its peers. Even though it is the worst-performing fund in Figure 1, it still outperforms most of its competitors.
At InvestorPlace, our mission is to help ordinary investors make informed decisions about where to put their money. That's why we maintain a strict policy of editorial independence: our writers are free to write about any stock, style, or theme without worrying about what their bosses might think. It's one of the things that makes us different from other financial publications.