Finance Wanted.

By Jayne S Rupple

We all want to be buying and holding the best mutual funds. It's a term that searched hundreds of times daily in Google and the other search engines, as people seem to think that "best" is easily defined for a fund's performance.

The reality is that what makes the best mutual fund varies from investor to investor. You need to factor in things like your age, how long until you retire, and the number of years you need to retire. Of course that assumes that you are saving for retirement. You may also be saving for something like a down payment on a house, or for you children's college education. Goals like these significantly change the time horizon until you will need the funds, and so the investment style as well.

In addition, you need to factor in your tolerance for volatility or risk. Some folks like to define the best mutual funds as those that have a high historical return. If you try to find the funds that have the highest historical returns, most of the time those tend to be the funds that are most volatile as well. While it is easy to say that we can ride that volatility out because we know the long term return will be worth it, when it is happening to you right now it is much harder to ride out.

Finally, your fund selection needs to be made in the context of your total portfolio. Truly diversifying your portfolio is the best way to reduce the total volatility. But that requires finding funds that are not correlated to one another. So the choice of a fund needs to factor in the current holdings in your portfolio to determine if it is the "best fund." What is a good fund choice for one investor may not work well for another if he is already holding funds that are concentrated in the same industry or country.

Find the best ways to manage your mutual fund investments, including finding the best mutual funds. Get more information regarding mutual funds.