Investing Ideas For All Ages
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Conversely, an older couple, nearing retirement, may opt for the reverse calculations, looking for 80 percent of their mutual fund investments to be in income-generating, safer funds. They want income soon and are not in a position to take risks.
Some people may opt to put 80 percent of their investment dollars into riskier, aggressive funds and the remaining 20 percent into more conservative fund investments. They have time on their side and are not averse to taking some financial risk.
Mutual fund advertisements tell you, usually in the finest of print "Past performance is no guarantee of future results." While that statement has always been true, now's a particularly good time to take heed. It's been an especially topsy-turvy time for fund managers and investors, which makes it that much harder to evaluate potential homes for your investment dollars. Which is not to say you should ignore a fund's recent performance if you want to add it to your portfolio. Just take it with a big ol' grain of sodium chloride.
While no one sector is flying at that level today, you can take a more aggressive approach by looking at overseas markets and small cap, mid cap and emerging growth funds. In the more conservative portion of the portfolio, you?ll want funds with the large cap blue chip stocks, large cap value funds, income funds and bond funds.
Once you have a particular fund in mind, check with Morningstar Inc. or another fund-rating agency to see how the fund compared with its peers over one-, three-, five- and 10-year periods. If its annual returns are not in the top half of all funds in its category over most, if not all, of those time periods, this investment is a nonstarter. Walk away. If it is in the top five top 50 percent over all or most periods, look into it a little further.
It's important to keep in mind that value investing is not concerned with how much the price of a stock has risen or fallen necessarily, but rather what is the "intrinsic" or inherent value of the stock, and is it currently trading below that price, i.e. at a discount to it's intrinsic value. The important point here is that when looking at stocks that are trading at or above their intrinsic value, the only hope for gaining value is based on future events, since the stock price already represents what the company is worth.
However, when dealing with stocks that are undervalued, or available at a discount, unforeseen events are unimportant in that without any new earnings or additional profits, the shares are already "poised" to return to that inherent value which they have.
The Russell 3000 Index: The Russell 3000 Index represents more than 98 percent of the U.S. equities market. It is completely reconstituted each year to maintain an accurate picture of the market. An index fund mirroring the Russell 3000 covers a broad spectrum of equities.
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