Question

Assume that your uncle gave you $50,000 to invest solely in mutual funds. Based on your point in the life cycle and your investment philosophy, identify your investment goals and explain how you would spread your money among different funds.

Answer 1

Investing in Mutual is less risky compared to Other Investment Options. One can start investing even with $7 (for instance) monthly.There are many types of Investing in Mutual Funds like Equities, Bonds, Money Market Instruments.

Basically it is used by those who has less expertise in Investing. They form into groups and Invest with a common goal.

Well, there are many good strategies to invest in mutual Funds.But it depends upon the risk appetite of the Investor also. Since it is followed by people who have limited expertise in this domain as said above, their risk taking would be low.

So, If i have $50,000 , I would Invest in Diversified Portfolio. It is less risky and gives optimum return on Investment even when markets are adverse. Here, we may get a doubt, what is diversified portfolio?. Well, it is investing the money we have in to different Asset which operates in markets at different levels.

For Instance :

-> $25,000 can be invested in Equity Segment (High Risk Assets)

-> $15,000 can be invested in Money market securities ( Low Risk Assets)

-> $10,000 can be invested in Balanced Funds (Medium Risk Assets).