Stock Market Investing: How to Find a Good Mutual Fund

Updated on December 23, 2018
Believe in USA profile image

I've been investing since I was 16 and have accumulated over 20 years of independent investing experience.

Use free tools to find good mutual funds

There are 3 main ways to invest in the stock market: Individual stocks, mutual funds, and ETFs. People are often attracted to mutual funds since they offer diversification as well as the comfort of having your money under the care of a professional investment manager. In 2017 there were 9357 mutual funds available for purchase in the United States. How does one navigate through this mass of options to find a fund that will make the enough money to meet their investment goals? There are simple techniques one can follow to select a good mutual fund that will allow them to meet their financial goals. This article will focus on using the Morningstar Fund screener, a tool available online that is absolutely free.

Morningstar Fund Screener

Use the Morningstar Fund Screener to narrow the mutual fund choices

The Morningstar Fund Screener is an effective tool at narrowing the list of the almost 10,000 mutual funds. This is a free tool available on the Morningstar website. First go to Morningstar.com, select the More drop down menu and select Mutual Funds. On the next page select the Basic Fund Screener. When you click on the Basic Fund Screener link it will ask you to either sign in or create a free account with Morningstar. It takes only a few minutes to set up the account and it is entirely free. Once this is done you will be directed to the Fund Screener page.

You can screen according to 4 categories: Fund type, cost, ratings and risk, and portfolio turnover. For this particular article we will be examining United States large capitalization stock growth funds. By definition, these funds invest in US based companies with a market capitalization of $10 billion or more. A growth fund is a fund whose goal is to invest in stocks likely to increase in value rather than generate income.

In the screener you will select US equity as the fund group and Large Growth as the Morningstar Category. For the manager tenure, I recommend selecting 10 years or greater. You want to look for managers that have a long track record with the fund. Every manager will have a random good year and bad year but their true ability becomes apparent over 10 years. For the cost and purchase section select $3000 as the minimum purchase. This may seem high but almost all funds have initial purchase requirements of at least $2500. I would select the expense ratio limit of no more that 1%. For the Morningstar category select 3 stars, 4 stars, 5 stars. I consider anything over 3 stars and above as investable.

For the return, select a return equal to or greater to the category average over 10 years. That means you are looking for a fund that performed equal to or better than the average large cap growth fund over the last 10 years. Select the show results tab. This will bring to a list of funds that meet the screening criteria.

Morningstar Fund Screener returns list of funds

This is what you'll see once you've sorted by 10-year performance
This is what you'll see once you've sorted by 10-year performance

Analyze the funds returned from the fund screener

Once you hit show results, the screener will return a list of funds that meet your criteria. It defaults to showing the funds in alphabetical order. I recommend viewing them according to performance. Select performance from the View menu located just below the Snapshot tab. This will sort the funds according to their performance. Next click on 10-year Return at the top of the fund list to sort all the funds according to their 10-year performance. From this screen you can start clicking on the individual funds to start analyzing them individually. You can click on the name of the fund and it will take you to the funds Morningstar snapshot page. This page gives you detailed information on the individual fund.


Individual fund snapshot

A snapshot of the T-Rowe Price Blue Chip Growth Fund.  This page offers great information on individual funds.
A snapshot of the T-Rowe Price Blue Chip Growth Fund. This page offers great information on individual funds.

Good managers perform well over time

The type of fund you want to invest in depends on a multitude of factors. The most important of these factors is risk tolerance and investment goals. Regardless of your goals and risk tolerance, we all want to put our money in the care of a person who has a long track record of success. That is why this article focuses on the long term record of a manager. Any fund manager can have a good year or bad year due to luck or chance. Over the long term however, the good managers separate from the poor ones. Regardless of which fund you choose I recommend you choose a fund with a long tenured manager who has had long term success with that fund. This will help you to rest easy knowing that your money resides with someone who has shown they can be successful through the ups and downs of the stock market.

Questions & Answers

    Comments

      0 of 8192 characters used
      Post Comment

      • Eurofile profile image

        Liz Westwood 

        3 weeks ago from UK

        You give good advice and make some interesting points. Track record is a key one. A good record counts for a lot.

      working

      This website uses cookies

      As a user in the EEA, your approval is needed on a few things. To provide a better website experience, toughnickel.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

      For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://toughnickel.com/privacy-policy#gdpr

      Show Details
      Necessary
      HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
      LoginThis is necessary to sign in to the HubPages Service.
      Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
      AkismetThis is used to detect comment spam. (Privacy Policy)
      HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
      HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
      Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
      CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
      Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
      Features
      Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
      Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
      Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
      Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
      Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
      VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
      PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
      Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
      MavenThis supports the Maven widget and search functionality. (Privacy Policy)
      Marketing
      Google AdSenseThis is an ad network. (Privacy Policy)
      Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
      Index ExchangeThis is an ad network. (Privacy Policy)
      SovrnThis is an ad network. (Privacy Policy)
      Facebook AdsThis is an ad network. (Privacy Policy)
      Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
      AppNexusThis is an ad network. (Privacy Policy)
      OpenxThis is an ad network. (Privacy Policy)
      Rubicon ProjectThis is an ad network. (Privacy Policy)
      TripleLiftThis is an ad network. (Privacy Policy)
      Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
      Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
      Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
      Statistics
      Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
      ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
      Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)