Doing either of these two things can be quite a task if you're not sure where to start. We've come up with several criteria to review in your decision making process. When you are considering each of these issues, you have to value things based on whatever criteria makes you comfortable and on your current investment needs. For example, if you are 83 years old and require the income from your investments to be able to survive, then a high-risk, non-income producing fund would not be for you.

1. The first criteria is the return of the fund. You should be sure to look at all returns associated with the fund when considering this. The YTD (year-to-date), 1-year and 3-year returns will provide you with an indication of current performance of the fund. The 5-year and 10-year and life-of-fund annual return figures will provide you with an idea about the medium to long term return picture.
2. Be sure to review the total return of the fund as well as the after tax return of the fund. To do this, you'll have to find out the long-term and short-term capital gains as a percentage of the total return. Once you know this you'll have to apply this to your tax rate to see how investing in a particular fund will affect your tax situation.
3. Another good performance indicator to look for is the return during recent bear markets. The last big stock market crash was in 1987 and this means that for many funds, they will stop reporting the return during that period after 1997 (as part of their 10-year return information). This will tell you how that particular fund fared during tough periods in the stock market.
4. It's typically a good idea to look at funds that have NOT received a recent large inflow of investment money. One reason is that fund managers may alter their investment strategy in order to invest these funds, they may purchase assets they would normally not have purchased had they not received the funds. This can be determined by looking at the total assets of the fund, which is available from the fund itself or in various publications (typically on a quarterly basis). These funds typically under-perform (but not always) at least their own history.
5. It's always good to look at the fund manager. You should look for recent changes in the fund manager as well as the past performance of the manager. If, for example, a fund was managed by one person for the last fifteen years and in 1996 a new manager takes over, it may or may not be a good idea to associate the historical returns of that fund to the new manager. This is a determination you will have to make for yourself.
6. One of the most difficult things to determine is how investing in a fund will affect your asset allocation strategy. This is not an easy question to answer and could take quite a bit of analysis.
7. One final thing to look at is the current condition of the market that the fund invests in. If the YTD return of a fund is 25%, this may not be the best time to jump in. If you're buying a stock fund, be sure to check a stock index which can indicate performance of that fund. If you are buying small-cap stock funds then looking at the recent performance of the Dow Jones Industrial Average is probably not a good comparison. It is better for you to compare recent fund performance to an index like the Wilshire 2000 or the Russell 5000, whichever is a better indicator of the stocks that the fund buys.

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