A consultant to retail, financial services, and investment management firms, McKenzie M. Slaughter says she launched her New York-based research, education, and consulting firm Beyond Capital Markets (www.beyondcapitalmarkets.com) last September to help private investors, hedge and pension fund managers, and other institutional clients examine asset classes that are off the beaten path. Along with her five colleagues, she scouts and analyzes opportunities in liquid alternatives, real estate, private equity emerging markets, and traditional alternatives.

Slaughter says individual investors can also get in on the act through exchange-traded funds, or ETFs, baskets of holdings in a wide variety of assets that trade like stocks. She likes ETFs as a cost-effective way to expose portfolios to alternative asset classes. An ETF investment can spread money across a variety of holdings and track an index of stocks, bonds, currencies, or commodities. Slaughter prefers diversified ETFs since single-sector, concentrated holdings are “more prone to market swings” and are higher risk investments. She also likes low expense ratios—typically 1% or lower—for the best-managed ETFs.

To the average investor, Slaughter points out, ETFs are a relatively new investment. She recommends several resources where investors can research them, including Fidelity’s ETF screener (http://screener.fidelity.com/ftgw/etf/evaluator/goto/landing), ETFTrends.com, and Morningstar.

1 SPDR S&P Emerging Markets Dividend ETF (EDIV) The growth of emerging market economies in countries such as China, Brazil, India, Russia, and South Africa offers investors a potential high-return opportunity. As such, the SPDR S&P Emerging Markets Dividend ETF tracks the performance of the S&P Emerging Markets Dividend Opportunities Index as closely as possible and is spread across several global regions including Asia, where 50% of the portfolio is invested; Latin America, with a 25% slice; Europe, with 12%, and Africa, with 9%. The ETF offers investors a way to capitalize on low Treasury yields, and generally invests in the 100 highest yield emerging market stocks that make up the Index and that represent industries such as utilities, telecommunications, financials, industrials, and healthcare. It is not limited to those funds, however. At press time, the largest holdings included Eletropaulo Metropolitana Eletricidade de Sao Paulo (3.04%), and Korea Exchange Bank (3.03%). The SPDR ETF has returned just over 10% since its inception in February while keeping expenses to a modest 0.59%.
PRICE AT REC.: $54.50  •  P/E: 11

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2 GreenHaven Continuous Commodity Index Fund (GCC) Commodity markets are another intriguing possibility. While demand for food and energy is steadily rising in both developed and developing economies, supply is stalling. That’s pushing commodity prices upward. Single commodity ETFs—those that track just agricultural goods, natural resources, precious metals, or industrial metals—have recently experienced a major swing in performance; diversified commodity ETFs, however, have been less volatile. Investing in a broad basket of agriculture, gas, precious metals, and other natural resources is also a great way to hedge against inflation. GreenHaven Continuous Commodity Index Fund tracks an index of 17 commodity products in five sectors with 24% of holdings in metals, 18% energy, 18% grains, 12% livestock, and 29% soft commodities (cotton, sugar, etc.).

This ETF focuses on futures contracts, which can rise faster in value than inflation and in turn can help investors protect portfolios against higher prices. The fund spreads its money evenly among all 17 commodities and rebalances daily, a move that limits its volatility. The one-year average for the GreenHaven ETF is 40.47% while the expense ratio is 0.85%.
PRICE AT REC.: $34.66  •  P/E: N/A

3 Vanguard Small-Cap ETF (VB) Small company stocks offer investors high growth but with volatility. An ETF that provides diversified exposure to the group is the Vanguard Small-Cap ETF. Its expense ratio is very low—0.12%—and the ETF seeks to track the performance of the MSCI US Small Cap 1750 Index. The ETF’s portfolio, with more than 1,700 holdings, is spread among a variety of industries—financials and information technology are its biggest weightings—providing diversification that protects investors from a downturn in any one segment of the economy. The Vanguard ETF has reported an average annual return of 7.46% over the last three years.
PRICE AT REC.: $71.56  •  P/E: 18

Brown is a senior financial adviser at the New York firm Altfest Personal Wealth Management, where she has worked for almost 10 years, and she holds a certified financial planner’s license. Brown’s specialty is retirement planning, a job that relies heavily on her fund picking skills.

“At Altfest, we take a value investor’s philosophy—we generally gravitate to undervalued parts of the market,” Brown explains. “Right now, we’re leaning toward investments in large-cap companies. By some reports, the small-cap segment of the stock market is overvalued by as much as 20%. Mind you, we don’t focus on any one portion of the market. That said, we see value in the near term in large company shares.” Brown talked to Black Enterprise about three promising mutual fund investments.

Yacktman Focused Fund (YAFFX)  is a large-cap value portfolio. The manager, Donald A. Yacktman, has been in charge of the fund’s parent since 1992. His track record is impressive: The fund ranks in the top 1% of its group over the last three, five, and 10 years. We like the fact that the fund limits downside in bear markets yet can hold its own during bullish periods. In 2008, for instance, Yacktman was down 23% while the market fell 37%. In 2009, the fund had a total return of 62.7% to the market’s 26.5%. The manager runs a small, concentrated portfolio of around 50 stocks and he sticks with his picks: Its portfolio turnover is under 10% a year. Yacktman tends to gravitate to the big names, too, such as Procter & Gamble and PepsiCo. It takes $2,500 for an initial investment in the fund although that amount is lowered to $500 for IRAs.
1-YEAR RETURN:     18.40%
5-YEAR RETURN:      11.89%
10-YEAR RETURN:     12.99%
MINIMUM INITIAL INVESTMENT:      $2,500
EXPENSE RATIO:    1.25%

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FPA Crescent Fund (FPACX) is also a value-oriented portfolio, although it gathers up a wide variety of investments—large- and small-cap stocks, foreign company shares, and bonds. Its manager, Steven Romick, has done a fantastic job as well: The fund ranks in the top 11%, 4%, and 1% according to Morningstar stats for the last three, five, and 10 years, respectively. The manager is a fan of large caps right now, with Aon, Walmart, and Microsoft in the portfolio. At the same time, he has a lot of leeway and can hold cash—which is now just under 20% of the portfolio—until the right opportunities come along. Turnover is relatively low at 32%, as are expenses at 1.17%. The fund’s required initial investment is $1,500 or $100 as part of an IRA.
1-YEAR RETURN:      15.80%
5-YEAR RETURN:      6.47%
10-YEAR RETURN:     9.51%
MINIMUM INITIAL INVESTMENT:      $1,500
EXPENSE RATIO:     1.13%

T. Rowe Price New Asia (PRASX)  is a good way to gain exposure to the rapid developments in the two emerging markets where almost 60% of the portfolio is invested. Manager Anh Lu took over in 2009, but worked with the previous manager before assuming the top spot. Asia is growing quickly, but we’ve seen instances when the fund is down as a good point to jump in. Take 2008 and 2009, for example. The fund fell 61% during the near collapse of global financial markets, but came back with a 103% gain the next year. The fund is a relatively active trader with a 49% turnover, but it keeps expenses low at 1%. The T. Rowe Price fund requires a first investment of $2,500 or $1,000 for IRAs. Finally, we like the long-term scenario for Asia’s growing economies—China and India.
1-YEAR RETURN:     19.27%
5-YEAR RETURN:      17.06%
10-YEAR RETURN:     17.11%
MINIMUM INITIAL INVESTMENT:      $2,500
EXPENSE RATIO:    0.96%

Ilyas Akbar, a retirement planning specialist for AXA Advisors, says it’s good for young professionals just starting out to think of their money as three buckets; short, mid, and long-term. BLACK ENTERPRISE and Akbar created a plan to help you identify your financial goals and some possible investment options for achieving those ambitions.

• Short-term

Short-term goals are generally defined as those goals you want to achieve within two years. Akbar says these can include building an emergency savings fund, saving for a down payment on a home, purchasing a car, or going back to school etc. In the event of an unexpected expense “you want to have liquid cash available that’s not tied up in the market,” he adds.

Savings Vehicles:

1. Savings account: Although interest rates are lower, your money is liquid and your deposits are FDIC-insured up to at least $250,000 per insured bank. You can easily transfer or withdraw your money from savings accounts.

2. Checking accounts: Although most are non-interest bearing, some banks and credit unions offer higher interest rates. These accounts are FDIC-insured and can be easily accessed. Banks may impose minimum balances, limit the number of transactions that can be made within a time period or may require direct deposit to qualify for the high-interest rate.

3. Money Market Accounts: The rate of return is typically higher on MMA’s since they are based on the current market rate of interest. They are generally FDIC-insured. Banks may impose minimum balances, or limit the number of transactions that can be made within a time period.

4. Certificates of Deposit: CDs generally receive a higher interest rate, especially on longer terms, which range from one month to five years. They are fairly liquid, but there is a penalty if you withdraw the funds before its maturity date.

Rate of Return: The average rate of return that one might target is 1-2%. “You won’t earn a lot on your money, but the benefit is liquidity and stability,” says Akbar.

• Mid-term

Mid-term goals are generally those goals that you want to accomplish in the next 5-15 years, such as early retirement, business, education, a second home or a large purchase. “This bucket provides financial flexibility, freedom and allows people to enhance their abilities in their lives,” says Akbar.

Where to Invest:

1. Mutual Funds: By investing in a pool of stocks, bonds, and other instruments with multiple investors, gives you holdings in several different companies (diversification). Like stocks, they can also be converted into cash.

2. Stocks: Ownership of a corporation represented by shares that are a claim on the corporation’s earnings and assets.

3. Real Estate: A publicly traded company that invests in a specific type of property, from shopping centers and office buildings, to apartment complexes and hotels.

4. Exchange Traded Funds: ETFs are similar to mutual funds in that they represent a collection of investments. Unlike mutual funds, ETFs trade on an exchange (hence the name). Some investors prefer ETFs to mutual funds because they have low expense ratios and generate lower capital gains taxes than similar mutual funds.

Rate of Return: The average rate of return that one might target is 6-10%.

• Long-term goals

“This is probably this biggest thing you’ll ever save for,” says Akbar. This savings for your retirement. Social Security won’t be able to fund your retirement. Here are other investment vehicles you may want to consider to help you start investing for your golden years.

Where to Invest:

1. 401(k)-Tax deferred retirement account that an employee elects automatic contributions from their paycheck to the plan on a pretax basis. Distributions received before age 59 1/2 are subject to an early distribution penalty of 10% additional tax unless an exception applies.

2. Individual Retirement Account: An IRA is a fund earmarked for retirement savings (There are several types of IRAs: Traditional IRAs, Roth IRAs, SIMPLE IRAs and SEP IRAs.)

3. Cash Value Life Insurance: An insurance policy that covers you for the duration of your life. It builds cash value

Rate of Return: The average rate of return that one might target is 8-10%.

Put your money where your mouth is (Image: Thinkstock)

Whenever I step into an unfamiliar restaurant, it always gives me a sense of comfort to see staffers, on their break, eating the same food that’s being prepared for patrons like me. Likewise, when I invest in a new mutual fund, I like to know that the people guiding that particular fund’s investments, the portfolio managers, have at least some of their personal money invested alongside me in that very fund. You should too.

Here’s how to find out: Go to Morningstar.com, type in any mutual fund’s ticker symbol, then click the menu marker that reads “filings”. Once you’re there, you’ll see a list of items, one of which will be “SAI”, or “statement of additional information”. That document includes details that fund managers must submit to government regulators and investors. It lists information such as the managers’ salaries and other portfolios they handle. The information isn’t always easy to locate, but somewhere in the document—often listed under the heading “disclosure of securities ownership” you’ll see the names of the portfolio managers along with a dollar-amount range showing how much of their own money is invested in that particular fund.

What if that figure is low or non-existent? Well, what would you think about a chef who doesn’t eat his own cooking?

• Do the choices in your employer’s 401(k) plan leave you wanting…more? We spoke to Dawn Brown, senior financial adviser at New York-based wealth management firm Altfest, to get a few tips on how to convince your employer to make a change, and expand the company’s selection of investment options.

• 1) Express your concerns, and be solution oriented: If employees are not satisfied with investment options within their employer-sponsored retirement plan, feel free to express concern to your employer. However, cautions against merely complaining. “Go with an outline of what you would prefer,” says Brown. “Is there a larger number of choices a different provider or different investment options?” To get a sense of alternatives, Brown suggests canvassing friends who work for other employers about their 401(k) plan choices.

• 2) Take advantage of in-office financial briefings: It’s not uncommon for companies to hold an annual meeting with employees and the 401(k) provider. Employees should take this time to inquire about additional plan options, advises Brown. Since employees cannot initiate a meeting with the provider, this is an opportune time. From there, address your concerns with your human resource department, which is traditionally responsible for handling any issues with the plan provider, adds King.

• 3) Seek buy-in: Consider banning together with colleagues to make a request or petition. “An employer will likely want the employees to be happy with the plan as it will increase participation rates,” says Brown. Low participation rates could spell trouble for employers as the retirement plan may become “top-heavy” – that’s when more than 60% of assets in a plan belong to “key employees” or employees earning more than $160,000 annually.

• 4) Know your rights: Investment plans are overseen by the Department of Labor who oversee ERISA, the law that governs defined contribution plans. While companies are not obligated to provide retirement plans, those that do offer them are obligated to maintain detailed rules of the plan. “By providing a 401(k) plan the employer has a fiduciary role,” says Brown. “This includes choosing the investment manager, choosing investment options and monitoring the performance,” The investment options your company offers should be diverse.

• 5) Think twice before exiting: Even if your options remain limited, you may want to reconsider completely withdrawing from a company-sponsored 401(k) plan. A 401(k) allows you to save funds tax deferred, up to $16,500 each year (with a catch-up for those over 50), explains Brown. Keep in mind that even though IRAs offer more flexibility in investment choices, they have much lower tax deferral amounts.

“Our triads are fund combinations that we feel are long-term purchase-and-hold-opportunities, where we feel that the funds work well together, and will complement each other in market swings,” says Grant, who believes now is a great time for investors to start ramping up their contributions. “2011 will potentially be the start of a market incline. Adjust your budget to pour some money into the market. Ride it up,” Grant says.

Recently, Grant talked to BLACK ENTERPRISE about three funds he’s recommending to clients in 2011.

1. ARIEL APPRECIATION FUND (CAAPX)

“By some people’s measures, midcap funds have outperformed all other categories of mutual funds over the last 15 years. I like this fund, first, because it’s midcap. Second, it’s had the same portfolio manager—John Rogers—for more than 20 years. So, there’s a consistency and predictability to the fund. It’s a Warren Buffet-inspired fund. That means it’s made up of companies whose businesses the everyday man can understand. Its top 10 holdings include Viacom, Northern Trust, Accenture, and drug company Baxter International.”

1-year return: 21.44%
5-year return: 4.33%
10-year return: 7.37%
Minimum initial investment: $1,000
Expense ratio: 1.18%

2. AMERICAN FUNDS GROWTH FUND OF AMERICA (AGTHX)

“This fund is an old one, founded in 1973. It’s managed not by one person but by a committee between eight and 10 managers—all of whom have more than 25 years in the business. These committee members don’t adhere to common wisdom, and they don’t engage in “style drift,” which means they stay true to the fund’s large-cap growth intentions. They never have more than 25% of their investments outside of U.S. companies. Expenses are very low because this fund doesn’t have a lot of turnover. Among the fund’s top holdings are Apple, Google, Microsoft, Oracle, and Union Pacific Corp. They hold a nice amount of gold too. If you look at historic rankings, you’re always going to see this fund near the top in terms of long-term performance.”

1-year return: 12.78%

5-year return: 2.24%

10-year return: 2.24%

Minimum initial investment: $250

Expense ratio: 0.69%

3. RYDEX S&P MIDCAP 400 PURE GROWTH (RFG)

“This ETF is a relative senior in the ETF world. It’s an index fund with low expense and a 9% return since 2006. There’s nothing sexy about it. It just follows the top 400 Midcap stocks in the S&P 500 index. There’s not a lot of movement or volatility. Top holdings are Netflix, Green Mountain Coffee Roasters, and F5 Networks. It’s always good to have an index fund like this in your portfolio.”

Price: $79

P/E: 8.09

Investing doesn't have scary -- or complicated.

For some, investing may seem complicated and downright confusing. But, when it comes to building wealth, investing in stocks, bonds and other funds help you reach savings goals and ensure you have money for your retirement or for loved ones in case something happens to you.

John Gannon, senior vice president of The Financial Industry Regulatory Authority(FINRA)’s Office of Education, offers these steps to begin your journey in investing:

Determine your goals for investing. Why are you investing? Do you want to save for retirement or to pay for college education for your kids? That’s very important to know because that will determine what investments will fit your time objectives. The longer time you have, the more options are open to you.

Understand your risk tolerance. How comfortable are you with the potential of losing money in the stock market? Some people can be comfortable with this while others would be very uncomfortable.

If you have a high risk tolerance, and you’re saving for retirement, for example, you might invest in riskier stocks such as growth stocks. If you’re close to age of retirement or saving for child’s college education, you might be more conservative with your investments.

Determine how much money you have to invest. Think about what your savings are, or the money you have left after all expenses are paid. (When you look at your savings, a certain amount should be set aside for emergencies.) Then, think about what other goals you have for those savings, such as retirement.

Determine what types of funds, or investments are best to meet your goals. Would it make more sense to invest directly in …

Stocks: Shares of the ownership of a company
Bonds: A debt security in which the authorized issuer owes the bond holders and principal is repaid at a later date
Other securities: These can vary from type to issuer.

Pooled investments handled by a professional funds manager: such as a mutual fund, or exchange traded fund (ETF), an investment fund traded on stock exchanges which holds assets such as stocks, commodities, or bonds, and track an index, such as the S&P 500 or MSCI EAFE. With these types of funds you get diversification across several different stocks immediately with a single purchase.

Do your research. Three important types of information to look for in a company before investing are earnings, revenue, and debt. This can be found in SEC filings, along with nonfinancial info such as what the company does, what plans the company has, and what risks the company faces such as lawsuits. These issues can be very important to assess overall risk of that investment.

If you’re working with a broker or adviser they often have terrific research tools which will allow you to compare different companies’ earnings, revenue, debt.

Also, look for news that may positively or negatively impact the company, such as regulatory changes or new government legislation.

It helps to invest in something you know. For example, if you’re a runner, you might have an interest in a sneaker company and compare competing companies.

You can check out financial Websites that track how a company’s stock is doing in the market (such as online brokerage sites, NASDAQ, S&P 500, and other financial news sites.)

Get professional assistance and be sure they are licensed. A financial or investment adviser can make recommendations to you on what types of investments to make to meet your goals. A broker can help you actually execute the trades as well, in some cases. FINRA offers a free online tool that allows you to research professional brokers and brokerage firms.

Going the DIY route? There are companies that allow you purchase stock directly from the company in the form of stock purchase plans, however, they do not make recommendations or give guidance as far as your investments.

RESOURCES

The Financial Industry Regulatory Authority(FINRA)
Certified Financial Planner Board of Standards Inc.

Dividend-bearing stocks offer several advantages:
Yield: If you get 2% or 3% or more from a stock dividend, you’re starting out with decent cash flow in these low-yield times.

Tax shelter: So-called qualified dividends (the kind paid by most dividend stocks) are taxed no higher than 15% in 2010. Investors with a taxable income of $34,000 or less (or $68,000 for married couples filing jointly) owe no tax at all.

Quality: When you buy a dividend-paying stock, you’re generally purchasing shares of a solid company. “Dividend-paying companies are those that generate excess cash,” confirms Christopher Davis, a senior mutual fund analyst at Morningstar.

Safety: With their cash payouts and history of profitability, dividend stocks tend to do relatively well in bear markets. “Some studies have shown that dividend-paying stocks have significantly outperformed non-dividend payers in down markets going as far back as 1970,” says Tom Lydon, president of Global Trends Investments in Irvine, California, and founder of ETFTrends.com.

A mutual fund or exchange-traded fund (ETF) with portfolios composed of dividend-paying companies can provide all of these advantages without being forced to pick individual stocks. According to Morningstar, there are nearly 100 dividend-focused stocks, mutual funds, and ETFs. To help you choose among them, it’s helpful to know how dividend funds can be sliced and diced.

Mutual funds vs. ETFs. The dividend funds with the longest track records are mutual funds. Typically, of course, they are actively managed, which means a portfolio manager has identified dividend-paying companies that will make good investments. Although there are exceptions, most dividend-focused mutual funds emphasize large domestic companies.

ETFs have gained popularity in recent years because of their low costs, tax efficiency, and transparency. Dividend ETFs generally follow an index of such equities. For example, the largest dividend ETF, iShares Dow Jones Select Dividend Index (DVY), tracks the Dow Jones U.S. Select Dividend Index. Since many dividend ETFs track foreign indexes, they serve as an access point to add foreign dividend payers to your portfolio.

High-payers vs. growers. Dividend mutual funds and ETFs generally split into two groups. One group focuses on stocks with above-average yields. Among the highest-yielding dividend funds, Eaton Vance Tax-Managed Dividend Income Fund (EADIX) currently yields well over 5%. Its top holdings include familiar names such as McDonald’s and ExxonMobil. This mutual fund also holds some high-yielding preferred stocks and may use “dividend capture” strategies, acquiring stocks just before they make their dividend payouts.

Other funds actually have low dividends. That’s because they buy stocks with rising dividends, theorizing that such companies are growing and will amply reward investors in the future. Franklin Rising Dividends (FRDPX), for example, limits its choices to companies that have increased or maintained its dividend rate for the last four consecutive years. Growth companies may trade at relatively high prices, though, which would drive down the dividend yield.

Performance payoff. With so many dividend funds following different strategies, performance varies widely. Nevertheless, dividend funds generally performed well in the last bear market. During 2008’s downturn, the leaders among domestic large-company dividend funds posted smaller-than-average losses and are ahead of the S&P 500 in performance over the last three years.

—Donald Jay Korn

The beginning of the workshop went smoothly. After we received hearty slices of pizza, the presenters passed out little cut-outs that resembled AMEX and VISA gift cards that you can purchase from CVS pharmacies. The offer: What if these cards were sold at a cost of about $3.75 and redeemable for $25 to put toward a mutual fund?

“So you don’t need a bank account to set up an account or invest in mutual funds?” I asked.

“NO!” replied the young female presenter excitedly, and then explained that this was the “beauty” of the service. Even if you didn’t have a bank account to transfer the money from, you could simply purchase one of these redeemable cards to put toward the investment.  My first thought: If you don’t have a bank account, you should not be investing in mutual funds. In order to invest, it’s important to first understand the fundamentals of money and money management, something most people gain an appreciation of through maintaining a bank account.

“Many people in impoverished areas are called ‘unbankable,’” says Dorethia Conner, a personal finance coach out of Warren, Michigan. “These are people who do not qualify for conventional lending and end up paying much higher interest rates when they are approved for loans. They may not have bank accounts, may operate cash only, or use Rush Card [prepaid debit card] types of services.” The unbankable segment of the population is especially attractive to certain lenders and institutions.

Conner urges anyone thinking about investing to first start with the basics.  If you don’t have a regular savings account because of monies owed, “pay the bank off so you can open an account.”

With the service Goal Mine would provide, customers would be able to go online, create a profile, and establish a savings goal (e.g., a vacation, car, home purchase). Then Goal Mine would match you

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up with one of five mutual funds that best fit your goal. If there wasn’t a mutual fund that fit, they would offer you an FDIC-insured savings account. The problem here is that mutual funds are for long-term goals—such as retirement—not for upcoming vacations and car purchases.

Furthermore, Goal Mine would allow investors to withdraw from their mutual fund for $1 and with no penalty. There was no mention of capital gains taxes either (the profit earned from buying an investment or other asset at one price and selling it at a different, higher price). In effect, the account could operate as a checking account instead of an investment fund. Also, if you were to use the company’s savings account, you’d be charged for every withdrawal—which is absurd considering all the free savings accounts offered by local banks. What did the company say the benefit of having this mutual fund was? Your money isn’t so accessible, so you’ll be less inclined to withdraw. Basically, their “mutual fund” would operate like a money market account but without the high interest rate and the free withdrawals.

The presenters did not mention what types of mutual funds the money would be invested in (large cap, small cap, emerging funds, etc.), and the funds were only three years old to begin with, which is a major red flag for anyone looking to invest in mutual funds.

The company seemed to be offering a product that would take advantage of people’s lack of knowledge about investing, preying on the less sophisticated investor. The unfortunate thing is, many of the people in the room bought it. “I have confidence in this. I support it. I think you’re going to have to have more workshops like this to get people into it,” said one woman who looked to be above the age of 55.

Conner offers these tips if you are looking to invest in mutual funds:

1. Look for a fund that has been in operation for at least 10 years
2. Make sure the fund manager has managed the fund for at least 5 years, but preferably 10 years
3. Select a fund with an 8%-12% rate of return
4. Pay off the bank! If you do not have a bank account, get right with your financial institution. Pay what you owe and re-establish your account.
5. Research the companies within the mutual fund. Have any of them received bad press?
6. Ask for a prospectus, which gives an overview of the fund
7. Research! Check out MorningStar.com for more information on your mutual fund