Evaluating Mutual Funds

Mutual Fund Benchmarks

Comparing a fund to its relevant benchmarks shows how the fund is performing in relation to other funds and investments in the same category.

Cost of Investing in Funds

A fund's expense ratio and turnover rate are two important statistics that can help you compare the costs of one mutual fund to another.

Past Performance

A fund's past performance is based on its historical returns. While not a guarantee of future results, understanding how the fund has reacted to economic conditions over time can help you gauge how it will likely perform going forward.

Risk Profile

Your mutual fund's risk profile, which you can find described in its prospectus, should align with the level of risk you're willing to take as an investor.

Management Team

Having confidence in a mutual fund's management team is an important factor when deciding where you want to invest.

Professional Analysis

Independent research firms like Standard & Poor's, Morningstar and Lipper not only provide in-depth research on mutual funds, but also rate or rank them. A fund's rating is based upon how well a fund meets a specific set of criteria.

The Fund's Prospectus

The Securities and Exchange Commission (SEC) requires all mutual funds to publish a prospectus that's made available for all potential investors either before they purchase shares or along with the confirmation of an initial investment with the fund.