How To Protect Yourself From Mutual Fund Issues
By Yaser Anwar, CSC of Equity Investment Ideas
Here are three ways you can protect yourself from these negatives about mutual funds:
1. Be your own money manager and invest in several mutual funds and individual stocks. Be prepared to take profits and use stop orders to protect you on the downside, in case there is a crash or bear market. I personally took profits and exited several of my favorite mutual funds during the most recent downturn.
2. If you want to be a long-term investor and not try to trade mutual funds, invest in a well-diversified "permanent" portfolio of index funds in a variety of categories: Consider a "permanent" portfolio of funds or Exchange-Traded Funds (ETFs) in growth stocks, bonds, commodities and cash. For example, the Permanent Portfolio Fund (PRPFX) attempts to do this all in one fund.
3. Consider going with a money manager who selects individual stocks and funds. Minimums are usually quite high for this approach: $50,000 or higher. Use a money manager who will post the value and composition of each position on the Internet, so you can constantly monitor performance. And stick with money managers who have a proven track record over five years.
Unlike a mutual fund, a money manager can go 100% in cash to protect you, if necessary.Fortunately, some relief for mutual fund investors may be on the way with publicly traded hedge funds that have the capability of going short or heavily into cash during a bear market.Until then, it's best to be your own money manager as much as possible. Studies have shown that individual investors often outperform professional money managers.
After all, who is more interested in your own money than yourself?
Source: Investment U
http://www.equityinvestmentideas.blogspot.com/
Here are three ways you can protect yourself from these negatives about mutual funds:
1. Be your own money manager and invest in several mutual funds and individual stocks. Be prepared to take profits and use stop orders to protect you on the downside, in case there is a crash or bear market. I personally took profits and exited several of my favorite mutual funds during the most recent downturn.
2. If you want to be a long-term investor and not try to trade mutual funds, invest in a well-diversified "permanent" portfolio of index funds in a variety of categories: Consider a "permanent" portfolio of funds or Exchange-Traded Funds (ETFs) in growth stocks, bonds, commodities and cash. For example, the Permanent Portfolio Fund (PRPFX) attempts to do this all in one fund.
3. Consider going with a money manager who selects individual stocks and funds. Minimums are usually quite high for this approach: $50,000 or higher. Use a money manager who will post the value and composition of each position on the Internet, so you can constantly monitor performance. And stick with money managers who have a proven track record over five years.
Unlike a mutual fund, a money manager can go 100% in cash to protect you, if necessary.Fortunately, some relief for mutual fund investors may be on the way with publicly traded hedge funds that have the capability of going short or heavily into cash during a bear market.Until then, it's best to be your own money manager as much as possible. Studies have shown that individual investors often outperform professional money managers.
After all, who is more interested in your own money than yourself?
Source: Investment U
http://www.equityinvestmentideas.blogspot.com/
posted by douglas mcintyre at 8:50 AM
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