Lets Talk Money Online - Three ways to compare mutual funds

Whether you need to choose among mutual funds* for your company 401(k) retirement plan's investments or you want to invest on your own outside the workplace, choosing the right mutual funds can be complicated. Yet, even if you rely on the expertise of a registered representative, you want to at least understand the basics of the mutual funds you choose. Here's a beginner's list of some things to examine before choosing a mutual fund.

Morningstar® and other research firms rank and compare similar types of mutual funds -- such as growth stock funds or municipal bond funds. Under-stand that these rankings give you a clear picture of past performance but can't predict future results.

Most stock funds decline in bear markets and rise in bull markets, so that won't tell you much about an individual fund. But how they perform compared to one another is helpful. For example, one value stock fund theoretically may have lost 15% during the last bear market but fared better than one losing 25%. Know how the competition ranks.

Certain mutual funds, such as very small stock funds and high-yield bond funds, are naturally among the more volatile and risky fund investments. Understand this rule: The higher the potential reward, the greater the risk.

Next, with your goals and time horizon in mind, choose appropriate funds, making sure they meet your asset allocation** needs. If necessary, rebalance your portfolio accordingly. Some workplace retirement plans offer automatic asset allocation and rebalancing tools that may help. Your registered representative also can offer some guidance.

* Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won't guarantee future results. An investment in mutual funds may result in the loss of principal. Mutual funds involve risk and are offered by prospectus only, which you can get from your registered representative. Carefully consider investment objectives, risks, charges and expenses of the investment company before investing. The prospectus will include this and other information; read it carefully before investing. Investing involves risks and there is no guarantee that any one strategy protects against a loss in a declining market. You should consult with your financial professional regarding your particular situation.

** Asset allocation won't guarantee a profit or ensure against a loss but may help reduce volatility in your portfolio.

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