Don'ts In Selecting Best Mutual Funds

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• Don't go by the past performance alone. For, an average of performance over a period will not tell you whether the performance is growing or at least maintained in the recent years.
• Don't go by hearsay about the reputations of a fund. There are various rating agencies which index the mutual funds regularly based on multiple factors. It forms your first step in finding the best performing mutual funds.
• Don't invest huge sums of money in a single fund or all the money in one go. Spread out your investments rationally. For example: Index funds for high returns, bond funds for lower risks, 401 (k) retirement plans and so on.
• Don't ignore absolute returns. NAVs and percentage growths don't factor-in the taxes and charges. Higher loads can diminish you in absolute returns. Some of the funds load you at both buying as well as selling. Even no load funds have fees such as Rule 12-b fees.
• Don't chase a mutual fund because it is performing great in a bull run in the stock market. Once the market stagnates or the trend reverses these funds will follow suit.
• Don't compare a mutual fund across the category. This means a diversified fund should not be compared with index fund. While choosing a best one compare funds from the same category regardless of the promoting companies.

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