Mutual funds recommendations

[ajknox]

So i would like to invest part of my liquid cash in a mutual fund (around $4k to start off initially). And of course, when i got started browsing for some of the mutual funds, i got confused (like which company, and then which types of funds). I would really appreciate if you could suggest some mutual funds to invest in so that I can manage them online. Wanted to know what works or has worked for you.
Also, when they say that the fees is 1% is that 1% when you cash out or on an annual basis? sorry if my questions are a little too basic

[meaghanchan]

This is a question that could be answered by books and books of information (and has been).

Briefly- I would focus on no-load funds with low expenses. A load is a commission paid to a broker- usually around 5%. An expense ratio (usually between 0.1% and 2%) is charged annually, on all your invested money- so on $4,000, in a fund with very low expenses (0.2%) would cost you $8/year. In a fund with very high expenses (2%) it would be $80/year.

I would look at funds at 3 great no-load mutual fund companies- Vanguard, Fidelity, and T Rowe Price. Or, you can use a fund screener like the one at Morningstar.com to narrow down your search.

Look carefully not just at performance, but what the fund's invested in. You will find great short-term returns on some single-country foreign funds, but you probably don't want to bet all your money on the returns of, say, Russia or China. Get a broadly diversified fund, like Vanguard's Total Stock Market Index- VTSMX- and you would own the entire US market. Or a total international fund- own the entire world market (except for the US). Or go for one of the Target Retirement Funds- get a broadly diversified portfolio in a single fund... Though, keep in mind, they're not very tax-efficient. I don't know if that's a concern for you, though.

Others will be able to chime in with more information.

[disneysteve]

I think meaghanchan gave a good overview.

I'd add that you need to think about what this money is for and what type of account it will be in. Is it retirement money in a tax-advantaged account like a Roth or is it in a taxable account. How long do you plan to hold the fund? What is your goal for this money.

Also, what other investments do you have, if any? If you are just starting out, a total stock market index would be a good first core holding. Later, as you have more to invest, you could add an international fund and some other things to diversify your money further.