When exploring the world of investments, it’s important to gain a broad perspective of the various types for a clear understanding of how each of them can work towards achieving your objectives. Each has its own investment characteristics which, when applied individually, may not be appropriate for your financial profile; however, when they are strategically combined in a portfolio, they can work in concert to meet your investment objectives within your risk parameters. It is, therefore, important to consider all investments in light of your specific objectives and risk tolerance.
Equity Mutual Funds: Rather than trying to pinpoint the next Google or Apple, you can leave it to the professionals to identify companies with the greatest potential and manage a whole portfolio of stocks on your behalf. This provides you with immediate diversification which is essential to minimizing your risk. You can achieve greater diversification by investing in mutual funds that focus on different industry segments or global regions.
Investments for Income: Bond mutual funds: As with stocks, bonds are bundled together in portfolios which are actively managed to produce income and capital appreciation for investors. Owning a portfolio of bonds is less risky for smaller investors because it is diversified and, it is more liquid.
Asset allocation and diversification do not ensure a profit or protect against a loss.