Investing in stocks is one of the best things you can do with your money. Purchasing individual stocks requires skill, time, and a certain mental fortitude, as well as a considerable capital investment to ensure ample diversification. You certainly don't want to put all of your eggs in one basket.

Stock mutual funds take a lot of the guess work out of picking individual stocks. Fund managers have more time and skill than you do, and they pool your money along with thousands of others, to attempt to create that diversification that is so necessary to mitigate risk. Of course, you can never eliminate market risk; that's where you seek to allocate your assets among other investments like bonds, metals, currencies, and real estate, to name a few options.

Certainly, the cornerstone of your stock portfolio is index funds. These are passively-managed mutual funds that replicate the performance of the index they follow. They are considered passive because there is no active fund management; if the index changes, the fund changes. Index funds with the lowest fees always perform closer to the index than higher-fee funds.

It's vitally important, then, to purchase low-fee index funds. You'll simply get better performance.

There is another factor you should consider when buying index funds: The initial and subsequent investment amount. Vanguard offers some of the lowest-fee index funds in the mutual fund world. However, their minimum initial investment is usually $3,000. T. Row Price, on the other hand, often has much lower initial minimums, sometimes as little as $50 if you establish an automatic investment schedule with them. Going this route accomplishes two things: First, you can put your money to work right away, even if you don't have $3,000 to start. Second, you are practicing the time-honored principle of dollar-cost averaging, where you make regular fixed purchases of a security over time, buying more shares when prices are low, thereby minimizing your average cost.

You'll want to investigate various indexes. Did you know that the S&P 500 has averaged over 10 percent for a hundred years? Nowhere else can you get that kind of return. You will absolutely want to invest a good chunk of your investment dollars in an S&P 500 index fund. But if you simply invest all your dollars there, you will miss most of the world's markets, like Europe, Japan, China, Latin America, and Russia, to name a few countries and regions where there are major stock markets and potentially higher returns.

You may wish to consider index funds in those countries and regions. But you may want to invest in actively-managed funds that specialize there. These are funds that are managed by fund managers. As in everything, there are good ones and bad ones. Good ones can beat the market, and bad ones generally do not. Therefore, it is crucial to pick mutual funds that have demonstrated market-beating performance, and the way they do that is by retaining top talent. Peter Lynch, former manager of the Fidelity Magellan Fund, routinely beat the US market averages; he was a stellar fund manager. When he left, the fund took a downturn and has never returned to its former glory.

It's very difficult to consistently beat the market; in fact, today almost nobody does. However, it's your money at stake, so it behooves you to find the best fund managers possible.

The last factor to consider when choosing stock mutual funds is the commission: Many funds are no load, which means there is no sales commission, or front-end load. Stick with these. Funds that charge a load put you in the hole right away. For example, say a fund you're considering buying charges a 5 percent load. If you were to invest $1,000 in that fund, you'd write a check for $1,000 and the fund would deposit $950 in your account and pocket $50 for the privilege to taking your money. You just bought the fund manager a nice steak in almost any city. There is no evidence that load funds perform any better than no-load funds; in fact, the evidence is quite the opposite.

To summarize, choose stock mutual funds considering these factors:

• No load
• Low fees
• Sound fund management (if an active fund) or right index (if a passive fund)
• Low initial and subsequent investments

Now, get out there and buy some stock mutual funds! Your future depends on it!