I am thinking of investing in the equity portion of one of the mutual fund portfolios offered by Rule Your Retirement. Right now, I am invested in a portfolio of 10 stocks that have done wonderfully this year, but this small number of stocks, in only three sectors, is too risky for someone my age.
However, I hesitate to invest in even well chosen mutual funds because mutual funds tend to water down returns because they hold so many stocks and because a new investor will be liable for the capital gains generated by the fund in the past.
Does anyone have an opinion as to whether mutual funds really do generate smaller returns than a portfolio of stocks and if so, if their safety worth it?