Money Tip of the Week: How to tell if your mutual fund is 'garbage-y'
If you're a long-term investor, you likely own a mutual fund. These funds, which allow investors to "mutually" buy pools of stocks, bonds and other types of securities, are popular among individual savers as well as in workplace retirement accounts.
There are thousands of mutual funds to choose from out there, and they can't all be winners.
Some of them are downright "garbage-y" and could be dragging down your results, says Christine Benz, director of personal finance and retirement planning at Morningstar.
Worried you may have some trash in your portfolio? The No. 1 red flag is a high expense ratio, says Benz. High fees put funds at a huge disadvantage over time, and expensive funds are generally hesitant to trim prices, she says.
Search a fund's ticker symbol on Morningstar.com and navigate to the "Price" tab to see what it charges and whether the expense ratio is below average, average or above average compared with peer funds. The average passive fund charges 0.12%, while the average active fund charges 0.60%, according to Morningstar.
