Pick a Mutual Funds Advisor That Follows These Three Golden Rules

Pick a Mutual Funds Advisor That Follows These Three Golden Rules

You have decided to start putting some extra money away. The motivation is to save for your children’s college fund, or set up a retirement account, or maybe to save for a down payment on a house. All very good reasons and you should be congratulated for your decision. And you are thinking about investing in mutual funds. This is another good decision. Unless you follow the stock market or know of a stock broker who you trust and who has a good track record, the mutual fund market is the best decision.

Now what you need is a good mutual fund advisor. This decision is almost as important as the decision you made to start saving. If you are planning to invest this money over a long period time, such as for retirement, then the difference between good investment choices and average investment choices is staggering. And if the time frame of your investment is shorter, such as for a down payment on a house, the difference can still be substantial.

Here Are the Three Golden Rules of a Good Mutual Funds Advisor


How is your mutual funds manager going to be compensated? Typically there are three ways an investment advisor is paid: commissions, hourly rate charge, or a fee based on the amount of your investment fund. The first two, commissions and hourly rate charge, are probably not the best situation for you.

Investment advisors that are paid on commission earn their income whenever there is a transaction in your account. You buy into a fund and they earn a commission. What if that fund does not perform well? Then you sell that fund and they get a commission. But what if that fund does do well? Then you keep that fund and they do not get paid. Pretty easy to see that maybe this is not the type of motivation you want for your advisor.

The hourly investment advisor meets with you and makes some recommendations based on your investment goals. Then he usually steps out of the picture and leaves it up to you to monitor and evaluate your investments. This is probably not what you should want. You should be looking for someone with a more hands on approach.

The last type of compensation for a mutual funds advisor is the fee based advisor. This person is paid an annual fee that is a small percentage of your invest pool. This fee usually ranges from one to two percent. Here the motivation for the investment advisor is help you grow your investment larger, thus he gets a larger fee. It is a good situation for you and the advisor.

Six Month Reviews

A good mutual fund advisor should check in with you every six months. You will probably get monthly or quarterly statements about you account, but your fund advisor should contact you every six months and go over those statements and see if you have any questions. And do not be shy to ask any questions you have. It is your money and you need to oversee your advisor.

Annual Check Up

Your advisor needs to encourage you to sit down with him on an annual basis. At this meeting you should discuss with him not only the investment results, but also what your investments goals are now. Most likely they will not be changing every year, but there will be times that your plans have changed. And your investment advisor needs to be aware of what changes on going on in your life that might affect your investment future.


Saving for a future event is a great personal decision. And another important decision is picking the right person to guide your investments. Three good traits of a mutual funds advisor is fair compensation, semi annual review of your investment returns, and an annual check up of your investment goals.

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