What about total assets under management by the fund? Is bigger better or is smaller better? The answer, of course, is: It depends. A U.S. government bond fund or an index fund probably can't be 'too big,' since in general average costs decline and size doesn't get in the way of managing the assets. On the other hand, an aggressively managed fund, particularly one concentrating in mid-cap and small-cap stocks, can lose flexibility and be less nimble when assets grow too large.
A fund that is growing too fast can also pose difficulties for the manager, who may have trouble simply getting the new money invested effectively and in a timely manner. Size and rapid growth often force funds to change their investment strategies. For actively managed mid- and small-cap stock funds, give the nod to the smaller asset size fund.
Continue to Step 4 »
