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7. Investing in Mutual Funds > Evaluate Mutual Funds

Evaluate Mutual Funds

Check key fund measures to find funds that are likely to outperform the competition.

Let’s face it: most funds don’t beat the market. With more mutual funds available than individual stocks, how can you know which ones are the best? You must hone in on the factors that lead to outstanding performance, such as management tenure, low expenses, past performance, and low portfolio turnover.

The Index Advantage

There are two major types of mutual funds: index funds and actively managed funds. Index funds mirror the investments represented by market indexes, some tracking broad segments, such as the total stock market, while others focus on more narrow niches, such as small-cap growth companies. Actively managed funds, on the other hand, hire hotshot portfolio managers who aim to beat the market with their own special brand of buying low and selling high.


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