How to Pick Funds for Your Retirement Savings
Funds offer more diversification than stocks, so we look at a few factors to consider when choosing funds.
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Retirement may be a long way ahead, but there’s never a better time to start saving than now. You might have heard of a few stocks in the news and may consider investing in them. But Morningstar’s Christine Benz discourages individual stocks for investors starting out.
She recommends choosing well-diversified investments like index mutual funds or ETFs. These investments hold hundreds of stocks, providing instant diversification. When looking for stock funds, you’ll need to consider a couple of factors.
The first is asset allocation. There are many types of stocks, so consider which ones you’d like to hold.
The second is price. You should consider stock funds with low net expense ratios, like under 1%.
The third is investment style. For most investors, passive or index funds are the best bets--they're low-cost, diversified, and offer a hands-off approach to investing.