Diversification has many facets and it protects you.
This program will help you undo financial bondage.
Mutual funds provide broad diversification among stocks and/or bonds. Some have initial investment requirements of a few thousand dollars. However, some allow investors to bypass such requirements when they authorize monthly electronic fund transfers of as little as $50 from a bank account.
If you can’t or don’t wish to use this option, you should quickly save the required amount to invest in a mutual fund with a good reputation, good historical returns, and low expense ratio. Checking these items is less difficult for mutual funds than for individual stocks, bonds, and other investments. Your state securities regulator can let you know if a fund is reputable and the fund’s prospectus will display one-year, five-year, ten-year, and lifetime average annual returns and the expense ratio.
Large, medium, and small cap index funds are great choices when you aren’t sure how to identify acceptable returns or select funds based on the credentials of the portfolio manager. Index funds will provide you with a long-term average annual return that is commensurate with overall stock market returns for these categories of businesses.
As you learn more about investing, in an attempt to obtain higher returns, you could choose to invest in funds whose portfolio of stocks and/or bonds is based on a non-index fund objective and manager’s stock selection preferences.
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Published in: Personal Finance