Your Mutual Fund Investment Strategies

You can develop mutual fund investment strategies. These strategies may be aimed at saving your money or even to grow your funds substantially.

Earlier in "Getting Started with Mutual Funds" I discussed the main factors involved in mutual fund investing. With these in mind, you can either get started or maybe rethink your approach to investment funds.

When developing mutual fund strategies, it is important to recognize that most software programs, especially chart-based programs, are designed to work best with equities or ETFs. Team requirements, short-term trading fees and round-trip penalties for most mutual fund companies require different software programs.

As I mentioned in my articles on diversification, you should eventually have about eight (8) investment positions. For example, if you use a group like Fidelity Select funds, you can place all your positions in those funds, but that would be like betting on the eastern section of baseball's American League. The result will not be nearly as good or as secure as if you had three or four other groups of mutual funds where you have positions in each group.

My sources for mutual fund groups include:

• Fidelity Select funds
• Fidelity Funds
• Vanguard funds
• Kiplinger Magazine's annual list of Top 25 funds
• Money magazine's list of best-performing funds
• And this list can go on and on.

Thousands of mutual funds are available. Thousands. But you only need groups with as few as ten and maybe a maximum of one hundred funds to give you good investment choices.

In addition to the "source" groups, you can create groups based on class or industry. You can do this by going to one of the broker sites or magazines I've discussed earlier and sorting or filtering by these criteria, for example:

• Bonds - for a constant conservative investment
• Yield - for a constant, possibly conservative, cash flow of 3% - 8%.
• Domestic - to find out what is happening in the United States.
• Foreign - to invest in the best or new overseas markets

These two lists illustrate only nine (9) possible groups.

The next step is to either use software that allows you to find the best future artists within each group or perform basic analysis, study the manager's track record high return on investment and his longevity as a basic basic method. Technical analysis of the fund's performance compared to the markets as a whole is the method I use. You also need rules on when to sell and when to keep because it won't create a loss in your wallet if you don't sell when you have to.

Technical analysis removes all emotional and subjective aspects of your decisions. This method can be based on many ways to analyze a capital performance trend. You can do this with a spreadsheet if you have plenty of time, or with a software program. Programs will tell you what fund is the most likely best performer and also indicate if your current holdings continue to grow.

But you have to keep in mind the special mutual fund factors: minimum stock requirements when purchasing a fund; short-term sanction fees if you sell prematurely, and a possible frozen account if you repurchase a recently sold fund or funds prematurely within 12 months. In other words, either you or your software must track or base your sales and purchase decisions on how long you have owned a fund with a repurchase restriction for recently sold mutual funds so that you are not caught in the return trap.