But past performance is not as important as you may think, especially the short-term performance of relatively new or small funds. As with any investment, a fund's past performance is no guarantee of its future success. So, look at more than the fund's past performance when making your investment decisions.
Funds charge investors fees and expenses.
A fund with high costs must perform better than a low-cost fund to generate the same returns for you. Even small differences in fees can translate into large differences in returns over time. It takes only minutes to use the SEC's Mutual Fund Cost Calculator to compute how the costs of different mutual funds add up over time and eat into your returns. Know how the fund impacts your tax bill. The law requires a fund to make a capital gains distribution to shareholders if it sells a security for a profit that can't be offset by a loss.