Font Size : Increase font size Increase font size Decrease font size
Online Trading Tips

«     »

"wwsgd" style="display:none;">

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Conversely, an older couple, nearing retirement, may opt for the reverse calculations, looking for 80 percent of their mutual fund investments to be in income-generating, safer funds. They want income soon and are not in a position to take risks.

Of course, the above examples are broad generalizations. However, by creating your asset allocation blueprint you will then be able to select fund categories that fit appropriately and allow you to diversify. By diversifying across sectors, caps and fund categories, you lower your overall level of risk.

By diversifying across sectors, caps and fund categories, you lower your overall level of risk. In a sense, a good investor is doing at some level what a fund manager does by choosing diverse investments so that, if one does poorly, the others will more than make up for it. It’s been an especially topsy-turvy time for fund managers and investors, which makes it that much harder to evaluate potential homes for your investment dollars.

While no one sector is flying at that level today, you can take a more aggressive approach by looking at overseas markets and small cap, mid cap and emerging growth funds. In the more conservative portion of the portfolio, you?ll want funds with the large cap blue chip stocks, large cap value funds, income funds and bond funds.

Once you have a particular fund in mind, check with Morningstar Inc. or another fund-rating agency to see how the fund compared with its peers over one-, three-, five- and 10-year periods. If its annual returns are not in the top half of all funds in its category over most, if not all, of those time periods, this investment is a nonstarter. Walk away. If it is in the top five top 50 percent over all or most periods, look into it a little further.

Index funds let an investor stick with a successful benchmark that everyone uses. An index fund mirroring the S&P 500, or another broad-based index, lets you be in various sectors and invest in both growth and value funds, giving you maximum diversification.

Index funds can and often will outpace many of the managed funds during a bull market. In 1998, for example, some 80 percent of the funds designed to beat the S&P 500 did not succeed, making index funds a good choice. In a bear market, however, a good fund manager can be advantageous since the index fund will obviously drop. Of course, as is typically the case, over time, equities, equity funds, and the indexes can rebound, and in the long term such funds should be good investments.

The Russell 3000 Index: The Russell 3000 Index represents more than 98 percent of the U.S. equities market. It is completely reconstituted each year to maintain an accurate picture of the market. An index fund mirroring the Russell 3000 covers a broad spectrum of equities.

Visit: OnlinePRNews Financial Advisor or just click: Ezine Articles Financial Advisor

RSS feed


No comments yet.

Sorry, the comment form is closed at this time.