Mutual Funds can be a great way to earn money for one's retirement as well as other financial goals. But at the same time investing your money in mutual funds involves risk. Moreover, all the fees and taxes diminish the fund's income, and thus your income. It is worth understanding the way a mutual fund operates, realize all the probable risks and consider all these factors when choosing a fund to invest in.

Major points to remember:

· Keep in mind, that ALL Mutual Funds have costs that lower your investment returns

· Do not judge by the past performance of the fund. If a fund had very high returns last year, don't be blinded by the fact. Still the fund's past performance helps you assess the fund's volatility over some time

· FDIC or any other government agency does NOT guarantee or insure mutual funds. The point is that you can lose you money investing in a mutual fund

How to purchase shares?

In order to buy shares you can either contact the fund directly or purchase through banks, brokers, insurance agents, financial planners etc. All the mutual funds buy your shares back, and must pay you the money within 7 days.

The easiest way to learn the value of the fund's shares (and thus your shares) is to visit its web-page or call a toll-free number. Moreover, the NAVs of the major funds are often printed in newspapers and magazines.

When you purchase shares you pay the current NAV plus the fee the fund assesses at the time of purchasing (purchase sales load or other fees). If you sell the shares, you get the current NAV minus the redemption fees assessed by the fund. You should keep in mind that a fund's NAV goes up or down daily as the value of its possessions is constantly changing.

Exchanging Shares

There exists such a phenomenon as a "family of funds". It is a group of funds that share administrative and distribution system. Each fund making a family might have different investment type and pursue different economic goals.

Some of the families offer privileges within the family. For instance, shareholders might transfer their holdings from one fund to the other without any fees. To learn about the operation of transferring holdings in a specific fund, read the "shareholder information" section of the prospectus.

REMEMBER that exchanges have tax consequences. You are liable for any capital gain (or a capital loss) on the sale of your old shares, even the fund doesn't take transfer fees.

Factors to consider

· Degree of risk

· Fees and Expenses

· Classes of funds

· Tax Consequences

· Past Performance

· Look beyond the fund's name