What other considerations exist when attempting to choose the right mutual fund?

Another consideration is how well the fund performs in comparison to its peers. Is it the best, or is it among the worst? Consider also the actual manager, and the time the manager has been managing this portfolio, since it is his stock picks that will create the returns you will realize. Has the manager been in the job for a few months, years, or decades? Does the manager have a great track record over time?

What are some other key considerations when deciding in which mutual fund I should invest?

Try to find out how well or poorly the mutual fund performs in the best and worst of times. Ask yourself: If the fund loses 25% in its worst decline, but its peers lose 50% in their worst decline, can I live with that scenario?

What does the Securities and Exchange Commission recommend investors do when considering investments in mutual funds?

Experts at the SEC recommend that before you invest in a mutual fund, you should not focus entirely on a fund's past performance. Compare such factors as the fund's sales charges (fees or loads), tax implications as it generates gains (or losses), the size of the fund, how many years the fund has been in operation, the risks and volatility of the fund, and any recent changes to the fund's management or trading and investing goals. You can discover this information by scrutinizing the fund's prospectus and annual (or quarterly) reports, and by using reports published by mutual funds rating research organizations.

How can I protect myself from fraud when I am considering investing in a mutual fund?

Many mutual funds use the services of outside companies to manage their funds, sometimes known as "investment advisers" that are supposed to be registered with the SEC. The SEC always recommends that you scrutinize this registration to ensure that the investment advisers are registered with the SEC by going to the SEC's website and doing some background checks.

What has been the average annual return of the S&P 500, a good indicator of the performance of listed stocks that frequently make up mutual fund investments?

The average annual return of the S&P 500 was 11.69% from 1926 to 2011, 9.07% from 1992 to 2011, and 10.05% from 1987 to 2011.

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