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I have 5k to invest in stock market but do not want to select individual stocks. I would do it through mutual funds. I am willing to accept a moderately high amount of risk. How can I find a good mutual fund that meets these criteria?

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Harry, where are you located? U.S.A., or elsewhere? –  Chris W. Rea Jan 17 '11 at 1:14

3 Answers 3

Just find a low cost S&P 500 index fund, and spend your time reading The Great Mutual Fund Trap instead of wasting your time and money picking actively managed funds.

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38 or so shares of SPY (about $5k) can be bought (and later sold) for under $10 per transaction at several brokerages. Low cost, liquid, easy. –  bstpierre Jan 18 '11 at 3:58
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Vanguard's VOO isn't quiiiite as liquid but it's pretty close and if you have a Vanguard brokerage account, you can trade it for $0 per trade. That's right, free. Also, its expense ratio is .06% to SPY's .09%. Not that both aren't dirt cheap. –  fennec Jan 18 '11 at 16:44

The "Money 70" is a fine list: http://money.cnn.com/magazines/moneymag/bestfunds/index.html

Money magazine is usually more reasonable than the other ones (SmartMoney, Kiplinger's, etc. are in my opinion sillier).

If you want a lot of depth, the Morningstar Analyst Picks are useful but you have to pay for a membership which is probably not worth it for now: http://www.morningstar.com/Cover/Funds.aspx (side note: Morningstar star ratings are not useful, I'd ignore those. analyst picks are pretty useful.)

Vanguard is a can't-go-too-wrong suggestion. They don't have any house funds that are "bad," while for example Fidelity has some good ones mixed with a bunch that aren't so much. Of course, some funds at Vanguard may be inappropriate for your situation. (Vanguard also sells third-party funds, I'm talking about their own branded funds.)

If getting started with 5K I think you'd want to go with an all-in-one fund like a target date retirement fund or a balanced fund. Such a fund also handles rebalancing for you. There's a Vanguard target date fund and balanced fund (Wellington) in the Money 70 list.

fwiw, I think it's more important to ask how much risk you need to take, rather than how much you are willing to take. I wrote this down at more length here: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/

First pick your desired asset allocation, then pick your fund after that to match.

Good luck.

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Vanguard has a lot of mutual fund offerings. (I have an account there.) Within the members' section they give indications of the level of risk/reward for each fund.

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Here's the page you're looking for. It's not a members-only section. personal.vanguard.com/us/funds/vanguard/core -- sounds like the poster might appreciate the Wellington fund, VWELX? –  fennec Jan 18 '11 at 16:47

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