How to Evaluate and Choose Mutual Funds for Your University Retirement Account

In our previous article, Understanding Your Investment Options: Mutual Funds, ETFs, and Annuities, we discussed different investment vehicles available to University employees. Today, we’re diving deeper into mutual funds—one of the most popular and impactful options in your University retirement accounts. Understanding how to evaluate and choose mutual funds can significantly boost your retirement savings, and Provizr is here to simplify the process for you. 

Why Choosing the Right Mutual Funds Matters 

Picking the right mutual funds isn’t just another financial task—it’s one of the most important decisions you’ll make regarding your retirement future. Mutual funds can grow your retirement savings substantially over time, but the wrong choices—such as picking overly expensive or underperforming funds—can set you back considerably. 

Unfortunately, many University employees make common mistakes such as overlooking fees, chasing short-term returns, or neglecting proper diversification. Let’s avoid these mistakes by following a clear, simple process. 

Step-by-Step Guide: How to Evaluate Mutual Funds 

Here’s your easy-to-follow process for selecting mutual funds for your University retirement account: 

Step 1: Review Fund Performance 

Check how a mutual fund performed over multiple periods—1-year, 3-year, 5-year, and 10-year returns. Focus primarily on longer-term consistency rather than recent short-term results. Steady long-term performance typically indicates a well-managed fund. 

Step 2: Understand Fund Fees (Expense Ratios) 

Fees, expressed as an expense ratio, directly affect your returns. Even small differences can significantly impact your savings over decades. Lower-cost funds often lead to higher net returns. 

• Ideal expense ratios: 

• Low cost: under 0.50% 

• Moderate cost: 0.50%-1.00% 

• High cost: above 1.00% 

Step 3: Check Fund Diversification and Holdings 

Look closely at what the mutual fund actually invests in—stocks, bonds, international assets, etc. A broadly diversified fund helps lower your overall risk while providing consistent returns. 

Step 4: Consider Fund Management (Active vs. Passive) 

• Active management: Professional fund managers actively pick stocks or bonds, aiming to beat market returns. 

• Passive management (index funds): Simply tracks a market index (like the S&P 500). Lower costs, predictable returns, often an ideal choice for most retirement savers. 

Mutual Fund Categories to Consider 

Here’s a quick overview of the most common fund types in University retirement plans: 

• Growth Funds: Higher risk, potentially higher returns. Ideal if retirement is decades away. 

• Balanced Funds: Moderate risk and stable returns. Great for mid-career University employees. 

• Income Funds: More conservative, focused on generating steady income. Typically favored by those nearing retirement. 

• Target Date Funds: Automatically rebalance and become more conservative as your target retirement year approaches, simplifying your investing significantly. 

Real-Life Example: Mark’s Mutual Fund Choices 

Mark, a 45-year-old University staff member, was uncertain about selecting mutual funds for his 403(b). After evaluating options carefully, Mark chose: 

• A Balanced Fund to offer steady growth without too much volatility. 

• A Target Date Fund that gradually shifts investments to become more conservative as he approaches retirement. 

Now Mark confidently knows his investments match his risk comfort level and retirement goals, without needing to constantly check and adjust. 

Quick Tips to Choose Mutual Funds Confidently 

• Prioritize Low Fees: Lower costs generally mean more money stays in your account over time. 

• Favor Diversification: Choose broadly diversified funds or combine multiple fund categories. 

• Annual Reviews, Not Frequent Changes: Review your fund choices annually, but avoid constant changes based on short-term market swings. 

Common Questions Answered 

Q: How often should I review my mutual fund selections? 

A: Annually is ideal. More frequent reviews may encourage emotional investing and unnecessary changes. 

Q: Should I pick actively managed or index (passive) funds? 

A: Passive index funds are typically cheaper and simpler, making them a smart default choice. Active funds can perform well, but carefully consider fees and performance consistency. 

Q: Can I mix different mutual fund types? 

A: Absolutely! Blending funds—like a target date fund with a balanced or growth fund—can give you personalized diversification. 

Ready for More Investment Insights? 

Mutual funds are powerful retirement-building tools—but there’s much more you can do. For a complete understanding and deeper insights into building your University retirement plan effectively, download Provizr’s comprehensive Investing 101 Guide today. 

👉 Download the Investing 101 Guide 

Missed the previous article? Understanding Your Investment Options: Mutual Funds, ETFs, and Annuities 

Coming up next in our Investing 101 series: 

“Active vs. Passive Investing: Which Is Better for Your University Retirement Account?”