How to pick the best funds

There are thousands of funds on the market. Some are well managed and reasonably priced, but most are not. So how should investors go about choosing their funds for 2006?

There are thousands of funds on the market. Some are well managed and reasonably priced, but most are not. And buying the wrong one can make a dramatic difference to your pocket: in 2005, for example, the best fund in the European Excluding UK sector (which contains 99 funds) was Premier European Growth, which returned 37.8% and the worst, Aberdeen European Opportunity, returned 16.9%. So how should investors go about choosing their funds for 2006?

The first thing to do is to look at past performance, says Mark Atherton in The Times. This is far from fool-proof (past success is no guarantee of future success), but it's true that some funds do perform consistently well. Take a look at a fund's year-on-year track record for the past three or five years. If it has managed to stay in the top quartile in every year, it's doing extremely well, says Atherton.

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Emma Thelwell

Emma is a former digital journalist with more than 15 years of experience in national news in the UK and overseas. She was an assistant editor at MoneyWeek, covering property, funds, alternative investments and the share tips pages, then Emma moved on to The Daily Telegraph, first as a personal finance reporter and then as a business reporter. 

Emma also worked as a finance correspondent for Ninemsn (Australia’s Channel 9 online) in Sydney, Australia for just over a year, and since then Emma has worked at Channel 4 News as a reporter and producer, and she spent more than 4 years at BBC online. At present Emma is a senior manager for content and thought leadership at PwC.