So you've decided you want to investment some money in a mutual fund, how should you go about picking that fund? Picking a mutual fund is a very important decision and not something that should be taken lightly. The wide range in returns from one mutual fund to another means that selection is everything in this area.
The first thing I believe you should do when picking a mutual fund is remember 
that you should gauge the return in a real return basis. By this I mean that you must factor in expenses, any loads, and turnover rates in the mutual fund. Personally, I think your search should always start with no-load mutual funds. There are so many good mutual funds out there today who charge no load, that you would be unwise to get into a loaded fund. What is a loaded fund? A loaded fund is one that charges a fee either upfront or when the fund is sold, generally in the area of 5%. These loads are usually charged because it costs the mutual fund company to work through a middleman, meaning those who sell directly to investors are usually the no-load funds.
After finding a no-load mutual fund, you should then look at the expense ratio of the fund. An expense ratio generally consists of administrative costs, management fees, and the 12b-1 fee. The typical expense ratio currently is right around 1.5%. The expense ratio of the mutual fund you are in matters, a lot. This is where you must be careful with taking the advice of a full service broker, because often a broker will sell you a fund that has a load (since they are getting paid to sell it to you), and has a high expense ratio. You should steer clear of funds with expense ratios over 1.5%.
You will also want to look for a fund that doesn't have too high of a turnover rate. The turnover rate represents the percentage of a fund's holdings that change every year. A high turnover rate can really hurt the investor through increased taxes, as well as the expenses from the commissions from trading so often. Dale Wettlaufer wrote an interesting article about how much high turnover can hurt investors, that article is found at Motley Fool.
Obviously you want the mutual fund you choose to return a good percentage, so checking past performance is a must. Yahoo Finance has a good screener you can use to find the type of mutual fund you want, and you can search based on past returns. When searching for returns you should also check to see how long management has been around. You should look for managers who have proven to be successful no matter the market.
There are a lot of mutual funds out there that simply aren't very good funds, and using these screeners to weed out those funds should help you a lot in your search. Picking a mutual fund is not an easy thing to do, but if you take the time to do it the right way, you'll certainly have a good chance of doing well with your money.
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