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Successful Trading Mutual Fund Investing

For all investors, both new and old, getting a leg up is a big deal. While there is no magic formula to guarantee that you’ll never lose your money in investing, there are a series of common sense tips that will help you avoid common traps in mutual funds that can lead to you meeting both your short and long term investing goals.

A good first tip is to watch "Conservative Mutual Fund" fees and expenses. While 1 percent here and 2 percent there may not seem like much, those fees are coming right out of your profit, so keeping them at a minimum is very important. Try to stick to no-load mutual funds, they have fewer fees than load funds. Also, watch the management fees that a company charges on their funds. These vary a lot from company to company.

Have a good idea what the tax implications are on your mutual funds. There is more than just capital gains tax out there, and the amount of tax, when your fund is taxed and how it’s taxed can vary. The amount of tax you have to pay also depends on what tax bracket your income falls into. Make sure you understand all the ins and outs of taxes before you choose a fund to invest in.

Take a look at how large the mutual fund is and how long it’s been around for. The size of the fund matters because the bigger the fund, the less impact one individual stock has. If the fund has grown from the previous year, take that into consideration when checking last year’s performance reports. It’s possible that last year’s results were because the fund was smaller and the performance of one stock, either up or down, had a much larger impact on the fund.

Finally, make sure you understand the volatility of the fund. While the old adage rings true that you can’t win the game unless you play, you can still invest in mutual funds and seriously limit your risk. It all depends on what your financial goals are and how much risk you feel comfortable taking. If your goals are close, than you might want to invest in lower risk funds. If your goals are far off into the future, you can afford to take more chances.

The world of mutual funds can be exciting and fun for new investors. But no matter how much money you’re making, you must remember that it can all go sour. But with the proper knowledge and preparation, you can have a long and successful career in mutual fund investing.