Select a Mutual Fund Category to choose from, like from an investment research website akin to Zacks.com. If are you searching for capital appreciation – then you might desire a growth or aggressive growth fund, if you are looking for safety than you might choose balanced fund and if you are looking to invest in a certain sector such as technology you would choose a mutual fund from the sector based technology fund.

1) Once you have chosen a Mutual fund category use the Zacks Mutual Fund Rank to help you narrow the funds in the category to only Zacks #1 Ranked- (Strong Buy) and #2 Ranked (Buy) Funds.

2) Once you have a list of Zacks #1 and #2 ranked Mutual funds look for funds in that list that possess the following characteristics.

- The Mutual Fund Manager engages in as little market-timing as possible
- The Mutual Fund is well diversified in number of holdings and sectors,
- Highly rated Fund Manager

You can simply screen for these above characteristics using the Zacks Mutual Fund Screener as seen on Zacks.com.

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“Portfolio Turnover function” -shows the degree to which the portfolio is turned over during the course of the year. A low turnover means a Mutual fund manager “sticks to his guns” and has a long term conviction in the stocks he holds no matter what of market condition. These mutual funds engage in a little market timing as possible.

Check the amount of cash the mutual fund holds in the “Portfolio Information Section” – Mutual Funds that hold a low level of cash are usually fully invested. Look for funds that hold less than 10% of their portfolio in cash, this will assure that the fund manager is picking stocks and not trying to time the market instead.

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“Total issues function” – on the stock screener lets you easily find Diversified Mutual funds. Diversified funds are less volatile, and by and large safer than funds that hold a few number of stocks. Screen or look for funds that have more than 100 issues.

Manager Rating Tool- on the Zacks mutual fund screener will help you search for the for the best managers and the ones with the longest tenures with their fund. Screen or look for funds that have a manager rating of 4 or better.

Other Criteria

Low expense ratio. Look for Mutual funds that have a low expense ratio compared to its asset class or peers? Many academic studies have proven that the funds with the lowest expense ratios in their category on average outperform the more expensive funds. So look for Zacks #1 and #2 ranked funds in each category with the lowest expense ratios.

Aggressive Growth Funds - In Aggressive Growth Funds, fund managers aspire for maximum capital appreciation and invest in less researched shares of speculative nature. Because of these speculative investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than other equity funds. more…

No Load Funds -choose Mutual funds with no loads, if you have a choice between two similar Zacks #1 ranked funds in the same category go with the no load fund.

Manager Ownership – Mutual Funds or Mutual fund families where the manager is personally invested is another factor that has been proven to correlate with market outperformance. The easiest way to find this is to go to the funds website and pull up the “Statement of additional information report”. In this report it will show how much fund manager owns of his/her fund. Obviously the more money the manager has in his/her own fund the better.

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Read the Mutual Fund Prospectus or Fact Sheet – this will help you understand the investment philosophy of the fund to make sure it is property suited for your investment goals.

Hopefully this guide will help you choose better mutual funds while using a great investment research tool such as, the Zacks Mutual Fund Rank Screener.

For more information, please visit: http://www.zacks.com/funds/mutualfun