Finding The Right Mutual Fund

Whether you're a seasoned investor or a novice with a new 401(K), mutual funds can be a best-bet that can help protect your investment dollars from the downsides of a risky market. But that doesn't mean all mutual funds will do as well as their owners would like. Ray Hennessey, editor of Smartmoney.com, offers some suggestions.

You should look at two things for mutual funds when you are half way through the year. "You tend to see where geographically what's working, and also what size and style is working," Hennessey explains. When examining the chopiness of the market, domestic funds were up on average 3.05 percent International was up 8.06 percent and large-caps were up .84 percent.

And the reason some are doing better that others says Hennessey, is that "there is so much uncertainty with corporate earnings and the economy that the bigger players who are more leveraged to those kind of things aren't doing as well."

You may or may not want to bail out half way through the year if your funds aren't doing so well. "I tell people, at least once a year look back and say to yourself what are the fees I'm paying and what are the returns. If the returns aren't matching the fees that you are paying and you can do better some where else, pull the money and go somewhere else."

There are some funds that did very well for the first half of the year. In the large-cap, Hennessy Total Return went up 8.01 percent. In the small-cap funds, Bridgeway Ultra-Small was up a big 18 percent. And internationally, Janus Overseas was up 17.34 percent.

"I think you'll probably see the large-caps do better as we go into the second half of the year," Hennessey predicts.

Hennessey also recommends looking at the mid-cap funds as a place to invest.

For additional and more extensive investing and personal finance content from SmartMoney.com, click here.
by Jenn Eaker