New Year's Mutual Fund Resolutions

- Alan Lavine and Gail Liberman

• When shopping for a fund, compare the fund's year-by-year returns to those of similar funds. Check the fund's expenses and determine how long the manager has been at the fund's helm.

• Invest regularly for the long term.

• Stay well-diversified in stocks, bonds and cash. Don't be greedy.

• Consider owning real estate and gold funds as an inflation hedge. But keep no more than 5 percent of your holdings in these funds.

• Look at your mutual fund holdings at least every three months.

• Avoid sector funds, which invest in just one industry.They are risky.

• If you are speculating on high-flying stock funds, subscribe to a market timing newsletter. You want to be consistent when moving in and out of funds.

• If your fund changes managers, monitor the fund to see if it does as well as similar funds. Give it some time.

• Consider selling your fund if it is badly underperforming similar funds over at least three years.

• Be aware that growth funds and value funds take turns outperforming each other about every two to three years. So if you have a growth stock fund that has performed well in the past, stick with it.

• Typically avoid new funds until they have a track record. Possible exception: If a manager has a great track record running another fund.

• Keep your investment costs to a minimum. Stick with no-load funds with low expenses. If you hire a financial advisor, make sure you get a lot of services for your fees.

• Keep your taxes to a minimum. Keep tax-efficient stock funds and tax-free bond funds in your taxable accounts. Keep government and corporate bond funds in your tax-deferred retirement savings accounts. Keep high-turnover funds that generate a lot of capital gains in your retirement savings accounts.

• Consult with a financial planner or attorney about your investments as part of a tax and estate plan.

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Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books).