Look for a mutual fund that will fill a hole in your investment portfolio. If you already have a lot of large-cap funds, look for a small-cap fund. If your portfolio is dominated by growth funds, look for value funds. International funds can help diversify a portfolio dominated by U.S. stock funds, as can a bond fund. If this is your first mutual fund, consider a broad-based stock index fund that tries to replicate the performance of the entire market, or a balanced fund that includes stocks and bonds. You can tell what kind of stocks a fund buys (large or small, growth or value) by looking up its "style box" at www.morningstar.com.

Once you have targeted a sector, look for funds that have average or below-average expense ratios. This generally means less than 1.15 percent for stocks funds and less than 0.9 percent for bond funds.

Also look for funds that have been managed by the same person or team for at least three years,

Look at a fund’s performance, but bear in mind that past performance is no guarantee of future success. A fund’s absolute performance is almost meaningless. Focus on its comparative performance.

First, see how often it beats a relevant index (such as the Standard & Poor’s 500 for stock funds, the Lehman Brothers Aggregate Bond index for bond funds or the Morgan Stanley EAFE index for international funds). Next, see how it compares to funds in its category. For example, compare small-cap funds to the small-cap category average. You can also find this type of detailed performance data at Morningstar.com.