Mutual Fund Selection
Good Afternoon – given there are “1000’s” of Mutual funds, how do you choose?. I’m a Morningstar premium subscriber and can easily export a variety of fund criteria to excel and apply sorts, filters, etc. What I don’t know is what decision factors should I use to make a choice. Should I opt for ETF’s?
Thank You !!!
Permalink Submitted by Alan - IRA critic on Wed, 2020-04-15 18:40
You would first have to factor in your entire financial situation including the types of accounts you have. The most important issue is your risk tolerance, and that basically boils down to stock volatility and if you can stomach bear markets and crashes. Then determine how complex you want to make it, since 2 or 3 funds are enough for people who want a simple portfolio. Note that Morningstar looks at past performance, and past performance (particularly short term) is not necessarily predictive of future performance. Finally, most managed funds do not outperfrom indexes by enough to pay for the added expense ratio. For those that do, it usually only lasts for a short time frame.