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Published:February 6th, 2011 17:32 EST

Mutual Funds: Smart Choice for the Savvy Investor

By Alessandro Lopes

Considering the current turbulent economic environment, most investors are very wary about where their hard-earned dollars are invested. Without the proper education or professional guidance, it is a challenge for individuals to play " the stock market and come out on top. However, investing in mutual funds is ideal for those investors who are in search of a step above traditionally FDIC insured investment options. Mutual funds are unique because they gather money from several investors and collectively purchase shares of stock, bonds, and other financial instruments.

This action provides the individual investor with many strategic advantages. These advantages include instant diversification, professional management of the portfolio and overall less risk.  

In deciding how to embark in this journey of financial empowerment, one must first closely evaluate their individual investment goals, risk tolerance, and tax obligations. This is a crucial step because it helps narrow down which group of funds the investor should focus on.

Now it is time to pick some funds! The industry standard for the task of researching and analyzing funds is Morningstar, Inc. This screening tool is described across the board as a quick and effective way to jump into the mutual fund market. Some examples of fund categories and sectors include: Small/Mid/Large Cap, Technology, Communications, Health, Real Estate, Energy, Municipal Bonds, High Yield Bonds and many others. Other crucial factors to consider in the screening process include Year-to-date (YTD) return, manager`s tenure, required initial purchase and the Morning Star Rating. "   

There are many influential factors and the most influential will be discussed in a second installment of this article.