Five Questions to Ask Before Buying a Mutual Fund

Five Questions to Ask Before Buying a Mutual Fund
You may feel intimidated by the task of picking a mutual fund. With more than 15,000 funds to choose from, it's tempting to buy a magazine or visit a Web site that will tell you exactly which funds you should buy, or to just pick the fund that's topping the performance charts.

These aren't the best ways to find the fund that will meet your goals or suit your investment personality, however. The next section will give you a better idea of how to approach the vast marketplace for mutual funds and will introduce five questions that you need to ask and answer before buying any stock fund.

1. How has it performed?
2. How risky has it been?
3. What does it own?
4. Who runs it?
5. What does it cost?

These questions form the foundation of Morningstar's approach to fund selection. We'll address these questions in depth in subsequent lessons, but here's a taste of what's to come.