Picking the right mutual funds is a lot like selecting the right kinds of stocks to purchase. Among the similar strategic rules of thumb: If your company has a k plan, you probably have a good number of funds to choose from. A smart fund strategy mixes bond funds and stocks funds as well as funds that invest in domestic and overseas markets. If one strategy has done especially well, it will grow to become an outsized part of your fund portfolio. Each year, rebalancing your funds allows you to avoid overexposure to any particular portion of the market.

Anyone who rebalanced suffered fewer losses and found themselves in a position to better handle the downturn. The rebalancing act is crucial to avoid a familiar pitfall for fund investors: Each year, newspapers such as The Wall Street Journal list the top-performing funds.

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A lot of investors then plow their money into these top-performing funds. Past performance is no guarantee of future performance. Chasing performance is one of the most common fund investing errors. Rebalancing and sticking with your diversification strategy can help avoid this.

Index funds are mutual funds that invest in a portfolio of securities that represents a particular market like the entire stock marketor, a particular piece of a market say, like, international stocks or small companies.

Actively-managed funds are actively-managed by humans. The portfolio managers, research the vast investment universe and then pick and purchase things that match their investment strategies.

Investors pay these managers for their work. Then they cross their fingers and hope that the manager gets it right and beats the index. Essentially, these funds are mutual funds that are made up of investments in other mutual funds. The ratio of money allocated to stocks versus bonds gradually becomes more conservative as the investor grows older. You only need to figure out what in which year you plan to retire — and pick the fund that most closely matches that date.

Rowe Price, invest in actively-managed funds. Some lifestyle funds slap on an extra fee on top of the expenses of the underlying funds; how orkut makes money are funds that you should probably avoid. Balanced funds invest in a mix of stocks and bonds. Tax-managed funds attempt to keep taxable capital gains and other distributions to fund holders to a minimum. A number of investing advocates encourage investors to focus on index funds, rather than actively managed funds.

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Research data show that actively managed funds have a tough time beating funds that track market cap of african stock exchanges index.

After settling on a strategy for your anticipated needs, picking from the world of funds can be bewildering. Thousands of funds are competing for your attention. It contains information about investment goals, risk posture, forexperu empleo information, past performance data and amount of assets held.

Hopefully, your company has done a thorough job and offers you a comprehensive list of good funds that will allow you to build a well-balanced investment portfolio. Rowe Price or Fidelity, to name just a few. Many fund companies like Vanguard will allow you to set up brokerage accounts where you can buy funds from elsewhere. How orkut makes money of the online brokerages that house your IRA or regular brokerage account also offer fund supermarkets.

You want to pay close attention to fees when dealing with any supermarket. For example, Schwab makes you pay a lot to buy Vanguard mutual funds. Obviously, the supermarkets want you to buy their house brands, so those funds are unlikely to cost you any extra fees. Before you stock market in 1933 to any one supermarket, check out their wares and fee structure.

Lastly, you can buy funds via a human broker or certain financial planners. This route is often less cost-effective than others — brokers will tack on extra fees like sales charges and your planner may do the same.

There are a few other factors to consider when buying a fund: Funds are required to distribute capital gains and dividends to shareholders. While most distributions are made in December, some are made earlier.

The type of account that will hold the mutual fund. You want to take full advantage of your tax-sheltered retirement accounts — namely k s and IRAs — because taxes there are a non-issue. For your taxable brokerage account, consider tax-efficient investments such as: In a regular brokerage account subject to taxes, you generally want to stay away from mutual funds that generate hefty tax bills from capital gains distributions or dividends, which are better off inside your retirement accounts.

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How-To Guide Home Investing How to Buy a Mutual Fund. Email Printer Friendly Share: Buzz Fark reddit LinkedIn del. Tips Diversify your portfolio, mixing bond funds with stocks funds, and including domestic and overseas funds. Rebalance your funds annually to spread risk and avoid overexposure in any one area of the market. A fund's past performance doesn't necessarily indicate future success.

Seek out a diverse family of funds that have shown steady growth. Related How-Tos What Is a Mutual Fund? Related WSJ Articles and Blog Posts: Young Investors Can Find Mutual Funds Just for Them Five Ways to Pick Mutual-Fund Winners. Mutual Fund Cost Calculator -- Find out how much your mutual fund will cost and click on a link for frequently asked questions about buying mutual funds, from the U.

Securities Exchange Commission SEC. More Mutual Fund Calculators -- A list of different calculators for mutual funds, from WalletPop. Ratings and Research -- An analyses of mutual funds, from Morningstar Inc.

Evaluating a Mutual Fund -- From AIG Retirement. Definitions -- Market and financial terms from Investopedia.