Best Funds To Invest In: Where To Start?

Choosing the best fund to invest in depends on your financial goals, risk tolerance, and time horizon. There are thousands of mutual funds available on the market, ranging from stock and bond funds to balanced and target-date funds. Here are some key factors to consider when selecting the best fund for your investment portfolio:

- Diversification: Mutual funds offer instant diversification by allowing you to invest in a basket of securities with a single investment. This helps to lower risk and potentially boost returns.

- Affordability: Mutual funds typically have low minimum investment requirements and reasonable fees, making them accessible to a wide range of investors.

- Professional management: Mutual funds are managed by professionals who actively select and monitor the securities within the fund, providing expertise and saving you time.

- Liquidity: Mutual fund shares can be easily redeemed at any time, providing flexibility and accessibility to your invested funds.

When evaluating specific funds, consider the fund's track record, fees, and investment strategy. Look for funds with strong long-term performance, low expense ratios, and an investment approach that aligns with your goals and risk tolerance. Additionally, consider the benefits of index funds, which passively track a market index and tend to have lower fees than actively managed funds. Remember, past performance does not guarantee future results, so be sure to do your research and understand the risks involved before investing.

Index funds

Fidelity ZERO Large Cap Index (FNILX)

The Fidelity ZERO Large Cap Index mutual fund has no expense ratio, hence the ZERO moniker. While it doesn't officially track the S&P 500, it follows the Fidelity U.S. Large Cap Index, which is similar. This fund is great for investors looking for a broadly diversified index fund at a low cost to serve as a core holding in their portfolio.

Vanguard S&P 500 ETF (VOO)

The Vanguard S&P 500 ETF, backed by Vanguard, one of the powerhouses of the fund industry, tracks the S&P 500 index. This ETF began trading in 2010 and has hundreds of billions in the fund. With an expense ratio of just 0.03%, this fund is great for investors looking for a broadly diversified index fund at a low cost.

SPDR S&P 500 ETF Trust (SPY)

The SPDR S&P 500 ETF is the oldest ETF, having been founded in 1993. It tracks the S&P 500 and is among the most popular ETFs, with hundreds of billions in the fund. It's sponsored by State Street Global Advisors, a heavyweight in the industry. This fund is great for investors looking for a broadly diversified index fund at a low cost to serve as a core holding in their portfolio.

IShares Core S&P 500 ETF (IVV)

The iShares Core S&P 500 ETF is sponsored by BlackRock, one of the largest fund companies. This ETF tracks the S&P 500 and has been around since 2000, making it a long-tenured player. With an expense ratio of just 0.03%, it's a great choice for investors looking for a broadly diversified index fund at a low cost.

Schwab S&P 500 Index Fund (SWPPX)

The Schwab S&P 500 Index Fund has been around since 1997 and is sponsored by Charles Schwab, a respected name in the industry. Schwab is known for its focus on making investor-friendly products, as evidenced by this fund's low expense ratio of just 0.02%. This fund is great for investors looking for a broadly diversified index fund at a low cost to serve as a core holding in their portfolio.

Mutual funds

There are currently more than 9,000 mutual funds that hold more than $16 trillion in assets. Mutual fund expenses have been declining due to increased competition from lower-cost ETFs. Expense ratios averaged 0.63% in 2016, compared to 1.04% in 1996, according to the Investment Company Institute. However, some funds may charge additional management fees or sales charges.

While some mutual funds are index funds, most are actively managed. This means that fund managers follow an investment strategy to buy and sell securities in an attempt to beat the market. Mutual funds can focus on nearly every part of the market, and investors can choose from a variety of assets, including equities, bonds, real estate, and commodities.

• T. Rowe Price U.S. Equity Research Fund
• Northern US Quality ESG Fund
• Fidelity Select Semiconductors
• Fidelity Series Growth Company
• Fidelity Select Technology
• Fidelity Growth Company Fund
• Columbia Seligman Tech & Info Adv
• Fidelity Series Blue Chip Growth
• Fidelity Blue Chip Growth
• Vanguard Total Stock Market Index Fund
• Fidelity 500 Index Fund
• Vanguard 500 Index Fund
• Vanguard Total Stock Market Index Fund
• Fidelity Government Money Market Fund
• Vanguard Federal Money Market Fund
• Fidelity Government Cash Reserves
• Goldman Sachs FS Government Fund

Exchange-traded funds (ETFs)

One of the biggest advantages of ETFs is their low cost. They have lower expense ratios compared to actively managed funds because they require less work to manage. The expense ratio is an ongoing fee paid to the fund company, usually calculated as a percentage of the investor's assets in the fund. ETFs also tend to have lower investment minimums, making them more accessible to a wider range of investors.

When choosing an ETF, it's important to consider the fund's investment goal, cost, and performance. Look for ETFs with low management costs, as these fees can eat into your investment returns over time. Additionally, consider the fund's diversification and whether it aligns with your investment goals. Some ETFs focus on specific sectors, such as technology or energy, while others track broad market indexes like the S&P 500 or the Nasdaq Composite.

• SPDR S&P 500 ETF Trust (SPY): This ETF is one of the oldest, having been founded in 1993. It tracks the S&P 500 index and is sponsored by State Street Global Advisors.
• IShares Core S&P 500 ETF (IVV): This ETF is sponsored by BlackRock, one of the largest fund companies. It also tracks the S&P 500 and has been around since 2000.
• Invesco QQQ Trust ETF (QQQ): This ETF tracks the performance of the largest non-financial companies in the Nasdaq-100 Index, which has a large weighting in technology stocks.
• Vanguard Russell 2000 ETF (VTWO): This ETF tracks the Russell 2000 Index, which consists of approximately 2,000 small-cap companies in the U.S. It is managed by Vanguard, a well-known name in the fund industry.
• Vanguard Total Stock Market ETF (VTI): This ETF covers a broad range of the U.S. stock market, including small, medium, and large companies across all sectors. It is also managed by Vanguard and has been trading since 2001.

Money market funds

• Prime money funds invest in floating-rate debt and commercial paper of non-Treasury assets, like those issued by corporations, U.S. government agencies, and government-sponsored enterprises (GSEs).
• Government money funds invest at least 99.5% of their total assets in cash, government securities, and repurchase agreements that are fully collateralized by cash or government securities. Treasury Funds are also included in this category.
• Tax-exempt money funds (also called municipal money market funds) offer earnings that are free from U.S. federal income tax and, depending on the securities invested in, may also be exempt from state income taxes. Municipal bonds and other debt securities primarily constitute such types of money market funds.

However, it's important to remember that money market funds are not insured by the Federal Deposit Insurance Corporation (FDIC) and are not guaranteed to maintain a net asset value (NAV) of $1 per share. It is possible to lose money by investing in money market funds, and their yield may not always keep up with the rate of inflation.

Target-date funds

When choosing a target-date fund, it's important to consider the fund's track record, fees, and investment strategy. Look for funds with strong long-term performance, low expense ratios, and an investment strategy that aligns with your financial goals and risk tolerance. It's also crucial to remember that past performance does not guarantee future results, and it's essential to regularly review and adjust your investment portfolio as needed.

Frequently asked questions