With more than 8,000 mutual funds available to the public, knowing how to find the best performing mutual funds is critical. The most important tip: take your time.
The most popular way to determine the best performing mutual funds is to use Morningstar. As the most popular fund rankings company, Morningstar uses a star system to rate funds. Their system uses five stars, with five stars being warded to the best performing mutual funds and one star being poor performers. The main criticism of Morningstar’s approach is that their ratings
system is on past performance.
Another resource you can use to find the best performing mutual funds is the Lipper Leader Fund Ratings. Lipper uses five criteria in ranking mutual funds: total return, consistent return, preservation, tax efficiency and expense. While they factor in past performance, their rating system appears to be more focused on analytical formulas.
As a side note, investors are required to register with Lipper in order to access the fund rankings. However, Reuters news service uses Lipper rankings, yet allows immediate access to the information. In other words, you don’t have to register if you don’t want to
Starting there as preliminary research will help you to see the direction in which mutual funds are heading. Once you have selected a few of the best mutual funds to investigate you should learn more about the specifics of each fund.
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