I am always interested when people post to discussion groups, asking about "which mutual fund to pick". Helps remind me to think about WHY I picked the funds I did.

Mutual funds in some ways are like shoes. To some people, they only need a few mutual funds and they are happy.

To other people, having many mutual funds is important for one reason or another. And why someone chooses a mutual fund will also change from person to person.

If you need to know, I own more mutual funds than footwear- I THINK. But my wife has more shoes for sure.

The important thing to remember is a mutual fund selection can last a lifetime. I have to buy new footwear once every 3-4 years.

Step 1- know your "asset" allocation and risk tolerance. This means know if you want large caps, small caps, international, bonds, money markets- and/or whatever you want to invest in.

If you don't want to do step 1, then buy a single mutual fund (one size fits all)... either a total stock market index fund or a target retirement fund.

Step 2- plug and play various funds into the asset allocation. Most research suggests return has more to do with the allocation than any specific fund inside the allocation. Meaning you could pikc from any of the 6-7 mutual funds a fund family has for Large Caps, and choose another fund for bonds. The mix of 80%-20% or 50%-50% between these two funds will have more impact on returns than which fund you did or did not pick.

Step 3- if you want to interrogate a fund, I suggest looking at the following criteria:

a) will this fund be held in a taxable or tax advantaged account (IRA's, 529's and 401ks are tax advantaged).
b) what are the top HOLDINGS of the fund.
c) what percent of fund is in top 10 holdings (if 25%, this fund in concentrated, if 10-15%, the fund is diversified). This tells how much risk you are taking with fund compared to similar funds.
d)what is 10 yr and 5 yr history?
e)what are expenses (.75% or less for managed, .15% or less for an index fund).
f) how does fund rank relative to comperable funds?