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What's Next for Your Mutual Funds?Many mutual fund owners have suffered through three years of disappointing returns. Does that mean they should be asking for information about other investments?Maybe. But when it comes to positioning mutual fund money, there are two factors to consider.  Portfolio
DiversificationOwning mutual funds can add diversification to your portfolio.1 In a fund, the assets of many investors are pooled to buy a broad range of securities, such as stocks, bonds, and cash equivalents. Because different investments within the fund may react differently to changing market conditions, weakness in one area may be offset by potential strength in another. Combining a variety of mutual funds that pursue different objectives within a single portfolio can offer an even higher level of diversification. Conversely, selling one or more funds without carefully reallocating the remaining assets may unintentionally alter the balance of your portfolio. Risk/Return Potential Although selling a downtrodden fund may be appropriate under some circumstances, the decision to sell generally should not be based solely on past performance. Market fluctuations are a natural part of investing, so a sector or fund that is out of favor today could be headed for a possible rebound tomorrow. Likewise, today’s winners could quickly lose their appeal due to poor earnings reports or unfavorable press. In any market environment, the decision to buy or sell a mutual fund should be based on careful research that takes into account the fund’s role in your portfolio. The last several years have been challenging for investors. But keeping a long-term perspective and basing financial decisions on sound research can help you wade through market fluctuations. 1) There are fees, risks, and expenses associated with investing in mutual funds, including portfolio management fees and expenses and sales charges. Mutual funds are sold by prospectus only. Be sure to read the prospectus carefully before deciding whether to invest. Diversification does not guarantee against loss; it is a method used to help manage investment risk. © 2003 Emerald Publications |
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