Good Article. It does give the costs to be careful of.
I give below a method on how to invest in mutual funds?
1. Select 7 sectors which are growing. These will keep you diversified.
2. Find the top fund in each sector. Select on the top fund in each sector by adding the last 3 months and last 1 year return. For similar funds, select the fund which least cost associated for entry / exit load, expense ratio, etc.
3. Allocate equal amounts to all the 7 sectors.
4. Every 6 months, review the performance. Repeat Steps 1 & 2.
5. Re-allocate 50% of the funds to the top 2 best sectors. And the remaining money to the next 3 sectors. Eliminate the other 2 sectors.
6. While re-allocating, make sure the expense involved in selling a fund & buying another fund is minimum. If you use the funds from the same family, the expenses are normally minimized.
7. Repeat Steps 4, 5 & 6 every 6 months.
8. If we had started with 100,000, after 20 years this will be worth 1,800,000 - a return of over 18% per annum (this has been tested with last 20 years mutual fund data in USA)
