Adding a Fund to Your Portfolio

You've been eyeing a new mutual fund for months now, toying with the idea of adding it to your portfolio and wondering how and where it might fit. Before you take the leap and invest, here are a few things you may want to consider.¹

Seasoned investors know that timing the market can be a dangerous game. "Must have" funds touted by financial magazines can become disappointing investments because word of a fund's potential may already have driven up the price by the time the magazine has hit the shelf. To protect yourself from falling victim to the hype, remember the "buy low, sell high" philosophy, and make sure that your decision to invest is based more on a fund's long-term potential than on past performance.

Any time you buy or sell an investment, you run the risk of unwittingly altering your asset allocation. And the more you invest, the more it may affect the overall balance of your portfolio. If a fund has a history of extraordinary short-term returns, it may add more risk to your portfolio than you realize. On the other hand, an income-oriented fund might hinder your potential for long-term growth.

Investment icon Warren Buffett once said, "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes." The same general rule applies to mutual funds. Keeping a long-term perspective can help you weather market fluctuations and take advantage of potential long-term gains.

1) There are fees and expenses associated with investing in mutual funds, including portfolio management fees and expenses and sales charges. The return and principal value of mutual funds fluctuate with changes in market conditions. Shares, when redeemed, may be worth more or less than their original cost. Mutual funds are sold by prospectus only. Be sure to read the prospectus carefully before deciding whether to invest.

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