Mutual funds to invest in — A beginner’s guide for savers

Mutual funds are professionally managed pooled investments that enable investors to purchase fund shares representing a portion of a diversified portfolio. These portfolios typically include a mix of stocks, bonds, and other securities, depending on the fund’s strategy and objectives. When you invest in a mutual fund, you’re combining your money with that of other investors, giving you access to a broader range of assets than you might be able to purchase on your own.

One of the key benefits of investing in mutual funds is diversification. By spreading investment across multiple securities, this helps reduce the impact of any single asset's poor performance on your overall investment portfolio. This makes them a popular choice for both beginner and experienced investors seeking to build long-term wealth. 

When considering the top mutual funds to invest in, they are typically chosen based on several factors, including financial goals, risk tolerance, and time horizon, along with the fund’s fees and historical performance. This means that the top choice will be the one that works best for you. The top mutual funds often demonstrate strong long-term returns, consistent management strategies, and low expense ratios.

For example, growth stock mutual funds may appeal to those aiming for higher returns over the long term, while index funds offer low-cost, passive exposure to the broader market. Balanced funds can provide a mix of equity and fixed-income investments for moderate-risk profiles.

When choosing mutual funds to invest in, it’s important to understand the different types of funds available and how they align with your financial goals and risk tolerance. Among the many options, three major categories stand out: 

• Growth stock mutual funds

• Index funds

• Balanced (or target-date) funds

Each serves a distinct purpose in an investor’s portfolio, offering different levels of risk, potential return, and diversification.

• A fund that focuses on fund companies expected to grow faster than the market average

• Prioritizes capital appreciation over dividends or income.

• Typically includes large-cap U.S. stocks, especially in technology and consumer sectors.

• Since growth funds are often concentrated in sectors like technology, they can expose investors to higher volatility and sector-specific risks, which may be unsuitable for those looking for a more balanced portfolio.

Index funds replicate a market index like the S&P 500 or the Total Stock Market Index. They are often exchange-traded funds (ETFs) or mutual funds with:

•     Passive management

•     Very low fees

•     Broad market exposure

Ideal for cost-conscious investors, index funds are common in 401(k)s and IRAs.

Balanced funds combine stocks and bonds in one product. Target-date funds shift allocation over time, reducing risk as the target year approaches.

• Suitable for those seeking simplicity

• Popular among retirement savers

• Built-in asset allocation

When evaluating which mutual funds to invest in, it's important to go beyond just recent performance or brand recognition. For many American investors, this means balancing cost, performance consistency, and overall fund accessibility.

• Start by considering the expense ratio: A small percentage can have a big impact over time, especially for long-term investments. Lower fees allow more of your money to stay invested and compound over the years.

• Examine fund performance: Not just for the past year, but over longer periods such as three, five, and 10 years. This helps you understand how the fund has navigated different market conditions. Reliable mutual funds to invest in tend to perform similarly to their category or benchmark over time.

• Review manager consistency: A seasoned fund manager with a consistent approach can bring added confidence to your investment.

• Look at portfolio holdings: This can help you understand where your money will be invested. Whether the fund is focused on stocks, bonds, or a mix, knowing the sectors and asset classes involved is key to building a diversified portfolio.

• Consider accessibility: Some of the top mutual funds may require higher minimum investments or be available only in certain account types, such as IRAs or employer-sponsored retirement plans.

If you have extra cash at hand, but are still unsure which mutual fund you want to invest in, consider parking it in a high-yield savings account for the time being. High-yield savings products offered through Raisin give you competitive interest rates to grow your savings. Explore your options today.

While there’s no single mutual fund that qualifies universally as “the best,” consistent patterns emerge across many expert-curated and high-performing mutual fund lists. These shared traits can help investors identify funds that are well-managed, diversified, and aligned with long-term growth strategies. 

Many of the top mutual funds have the following in common:

• Low fees: Mutual funds with low expense ratios and broad market exposure are generally always desirable. Even small differences in expense ratio can dramatically impact compounded returns over time. Low expenses do not mean low performance; in fact, some high-performing funds often have lower than average expense ratios.

• Index tracking: Index tracking is a passive investment approach where an index fund is designed to match the performance of a specific market index, which provides investors with exposure to a broad range of markets or asset classes through one single investment. Common examples include the S&P 500.

• Rating and reputation: Highly rated funds often come from firms with a history of investor-friendly practices. They are usually transparent about holdings, risks, and costs.

• Strong and consistent long-term performance: Some actively managed funds have stood the test of time, maintaining a consistent strategy and delivering returns over multiple market cycles. Top mutual funds tend to outperform their benchmark index over multiple years and often have less volatility during downturns.

Choosing the right mutual fund starts with self-assessment. Here’s how to build your personal investment checklist.

1. Clarify your goals and time horizon: Are you investing for retirement, home purchase, or education? Longer investment horizons may justify growth stock mutual funds. Shorter timelines may call for bonds or balanced funds.

2. Assess your risk tolerance: Understand what level of volatility you’re comfortable with by assessing your risk tolerance. All investments carry risk, and it is important to be aware that past performance of top mutual funds is no guarantee of future returns.

3. Compare fees, sales charges, and taxes: Watch for sales charges or “loads” on mutual funds. Consider the expense ratio and long-term impact on returns. Taxes on capital gains and dividends may vary between accounts.

4. Check investment minimums and fund access: Some mutual funds require a minimum investment (e.g., $1,000 or $3,000), while others have no minimum when purchased through an IRA or employer plan. Many exchange-traded funds (ETFs) have no minimum and are traded throughout the day like stocks.

5. Don't rely solely on ratings: While ratings may offer valuable insights, you might also want to consider the fund’s sector and asset allocation, turnover ratio (how often it buys/sells securities), and consistency in manager strategy.

Many successful investors build stronger, more resilient portfolios by combining different types of mutual funds rather than relying on just one. A diversified allocation helps balance risk and return across changing market conditions.

Whether you're just getting started or fine-tuning your existing plan, mutual funds remain a practical and accessible way to build long-term financial growth. The most important takeaway? Align your fund selections with your personal goals, stay diversified, and revisit your investment strategy regularly — especially as life circumstances and market conditions change.

Raisin helps you grow your wealth with secure cash solutions. The Raisin marketplace gives you access to high-yield savings products with competitive interest rates, allowing you to grow your savings with low effort. Explore account types, compare rates, and start maximizing your savings potential today!

These funds can be volatile and concentrated in high-growth sectors like tech. This may lead to sharp declines during market downturns.

A higher expense ratio reduces your overall returns. For example, a 1% annual fee on a $50,000 investment could cost over $15,000 over 20 years.

Many mutual funds do require minimum investments ($500—$3,000), but others — especially ETFs or workplace retirement funds — allow fractional fund shares or no minimum at all.

• Mutual funds price once daily and are often suited to long-term saving.

• ETFs trade like stocks and may offer lower fees.

• ETFs can be more flexible, but mutual funds may offer better automation and access in retirement plans.

• ETFs tend to have lower expense ratios and can be more tax-efficient than mutual funds because of the way shares are exchanged “in-kind,” which can help reduce capital gains distributions.

The 7-5-3-1 rule is a general guideline to estimate average annual returns by asset class:

• 7% from stocks

• 5% from mutual funds

• 3% from bonds

• 1% from cash or savings accounts

It’s a rough benchmark to help set investment expectations, but real returns vary depending on market performance and fund selection.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.