by Catherine Rein
(last updated April 17, 2009)
In October of 2007 there were 8,015 mutual funds listed with the Investment Company Institute (ICI), a national trade association of investment companies in the United States. Mutual funds have several advantages over investing in individual stocks. You can get easy diversification with a mutual fund and you have the expertise of a professional fund manager.
Finding the right mutual fund for your needs means knowing a little bit about the ways mutual funds are measured. You can analyze a mutual fund by looking at its classification, its performance and its expenses.
The lowest expenses are typically associated with so-called index funds. These are funds that have their asset allocation tied to a certain index. Index funds typically have an expense ratio of less than 0.2% per year. This means that on a $100,000 investment you would pay $200 in annual expenses. Higher expenses are associated with actively managed funds. The average expense ratio for these funds is 1.5% per year.
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