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Author: TMFBalder Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 266490  
Subject: Re: Good portfolio ratios Date: 8/15/1999 7:43 PM
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<< My husband and I have quite a bit invested in different mutual funds. In fact, our entire portfolio is mutual funds. The funds are all different, health, technology, market index etc. Does this strategy go against "Diversity" in investing? or does the diversity in the mutual funds make up for it? >>

Hello EChance and a Foolish Welcome to You Both!

You write: "Does this strategy go against "Diversity" in investing?"

In terms of individual companies you are probably well diversified. However, what I frequently see is a lot of overlap in investment style and capitalization. Usually the holdings are top heavy with large capitalization stocks. This is not, per se, "bad". But you need at least to realize that this is the case. What you may want to do is list each of your funds and put a Morningstar style box next to each name. And if style boxes are new to you read up on them a bit as well. See Morningstar.net in this resource.

http://www.fool.com/community/resource/mutual.htm

TMF favors index mutual funds over actively managed mutual funds and specifically SP500 index funds. The reason is that they are very cost effective and, for the last several years have outperformed most actively managed stock mutual funds. See the TMF Mutual Fund center at this link.

http://www.fool.com/funds/funds.htm
http://www.fool.com/money/mutualfunds/mutualfunds.htm


This does NOT mean that you should drop everything and buy SP500 index funds. Rather you should take a hard look at what you have and determine if each holding has been doing a good job for you.

It is quite easy, in my opinion, to get carried away about the various style distinctions. I personally don't worry about it. Rather I try to find very good funds with reasonable expenses and consistantly good performance. So long as that continues I stay put. When it stops, and I cannot figure out why, I and my money move on to another fund.

All The Foolish Best!
Peter Lincoln
TMF BALDer


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