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The Securities and Exchange Commission Jan. 24 advised investors that “past performance should never be their only guide when choosing [mutual] funds.” Besides reading a prospectus and shareholder reports, the SEC recommended that investors assess a fund’s costs, which can have an “enormous impact” on returns, said an SEC press release that day. According to the SEC, a 1 percent higher annual fee will reduce a fund’s ending balance by 18 percent after 20 years. The SEC also recommended that investors: scrutinize the fund’s sales charges, fees, and expenses; know how the fund impacts their tax obligations; consider the age and size of the fund; think about the volatility of the fund; factor in the risks the fund takes to achieve its returns; ask about recent changes in the fund’s operations; check the types of services offered by the fund; and assess how the fund will impact their portfolio’s diversification. “Chasing fund performance is often the quickest way to hurt your mutual fund returns,” said SEC Chairman Arthur Levitt. “Investors should comparison shop for funds that best match their long-term financial goals and tolerance for risk.” The SEC’s mutual fund tips are available on the “Investor Assistance” section of the agency’s Web site at: www.sec.gov.

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