Mutual Funds: Most Of Us Have A Portfolio

BOSTON (WBZ-AM) -- Almost every goal we have as a grownup has a financial component to it. For some goals they just require paying a fee for the gym or weight loss program. But a comfortable retirement or a college education for the kiddo requires investment in the stock market.

And for most of us we use mutual funds for we don’t have enough money to have a diversified portfolio just buying individual stocks. We pay someone else, a fund manager, to mind the store for us and choose the investments. 

You will want to build a portfolio based on your goals and time horizon. How many mutual funds you own is partly a function of how much money you have to invest. And for many the easiest thing is to invest in an index fund. Eighty percent of managed funds underperformed their indexes, so index funds are good choices.

You don’t need a lot of mutual funds to be successful. Start with an S&P 500 index fund and then add a mid-cap and a small cap index fund. When there is more money add an international fund.

Keep your emergency fund in a money market. And the older one is the more conservative you should be with your retirement portfolio and begin to add bonds.

Learn about overlap. Overlap is owning too many of the same style mutual funds which invest in the same individual stocks. In doing your research check what the fund’s top holdings are to see how much overlap there is.

If you are investing outside your retirement plan at work, consider going to some type of mutual fund supermarket that allows you to own the best mutual funds from different companies.  Fidelity and Schwab both allow you to own other mutual fund families. 

This will put all your holdings in one place and on one statement which makes life a whole lot easier when it comes tax time.

You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m. and 3:55 p.m.  

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