Which funds should you avoid?

One of the most obvious factors here is to work out what sort of income you are looking for from the fund and then choosing accordingly - thus if you are looking for a possible fast return with more possible risk then you can look at various growth funds, for a solid but perhaps not spectacular return you can look at income funds.

Also if you have any particular interest (or disinterest) in a sector or area, then you can move to / avoid that sector in general; perhaps if you have certain ethical qualms with a particular sector for instance then you would want to avoid investing in funds that buy shares in the companies in that sector or could potentially do so.

And of course generally when you look at how funds have performed over the course of say five years if there are funds that appear to be doing nothing relative to other funds in the sector, then that probably won't inspire confidence in them and you will probably naturally decide that those are ones that you want to avoid.

To find out what the constituents of a fund are, there are various websites that contain detailed information of a large range of funds. However don't rule out the website of the provider of the fund itself - with the internet being used more and more and particularly in the financial sector, then many companies now do have detailed information on their website. So on many you can see a list of the main holdings in a fund together with what the aim of the fund is - called its "investment objectives" in the lingo.

Ultimately the funds that you should avoid is a personal decision based on many factors unique to yourself and your beliefs and the type of return you are looking for - but the above are some obvious factors that you will at least want to consider before making your investment decision.

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