The Importance of Diversification in Investing

Diversification is a key principle in investing, and it's especially important in today's uncertain economic climate. By spreading your investments across a range of asset classes, sectors, and regions, you can help to reduce the overall risk of your portfolio.

One way to diversify your investments is to allocate your assets across different asset classes, such as stocks, bonds, and cash. This can help to balance out the risks and potential returns of each asset class. For example, stocks are generally more volatile than bonds, but they also have the potential for higher returns over the long term. By including both in your portfolio, you can potentially mitigate the impact of market fluctuations on your overall investments.

Another way to diversify is to invest in a range of sectors, such as technology, healthcare, and finance. This can help to reduce the impact of economic downturns in any one sector on your portfolio.

Geographic diversification is another important factor to consider. By investing in a variety of countries and regions, you can help to reduce the risk of economic and political instability in any one location.

It's also important to remember that diversification does not guarantee a profit or protect against loss. However, it can be an effective tool in managing risk and maximizing your potential returns over the long term.

As you consider your investment strategy, be sure to take the time to understand the various options available to you and the risks and potential rewards associated with each. By diversifying your investments, you can help to build a strong, balanced portfolio that can weather market fluctuations and help you achieve your financial goals.

Example of Diversification

Imagine that you have a portfolio of $100,000 that consists solely of stocks in a single company. If that company experiences financial trouble or the stock market as a whole takes a downturn, the value of your portfolio could drop significantly.

On the other hand, if you diversify your portfolio by allocating a portion of your assets to other asset classes, such as bonds and cash, and investing in a variety of sectors and regions, the impact of any one investment on your overall portfolio could be lessened.

For example, you might allocate $50,000 to stocks, $30,000 to bonds, and $20,000 to cash. Within your stock allocation, you might invest in a range of sectors, such as technology, healthcare, and finance. You might also invest in international stocks, giving you geographic diversification.

In this scenario, if the company in which you have the majority of your stocks experiences financial trouble, the impact on your overall portfolio would be lessened by the other asset classes and investments in your portfolio. Diversification can help to mitigate the risk of any one investment or market event having a significant impact on your portfolio.

Best Mutual Funds for 2019 and 2020

The best mutual funds to buy for 2019 and 2020 will contain a various set of types. Smart, passive, and active investors don't try to time the market by jumping in and out of investments in the short-term. We should instead employ a buy and hold strategy for periods of more than one year. With this investing thinking in mind, we can define funds which are the best mutual funds to buy and hold for 2019 and 2020.

Typically, when we choose the best funds to buys, investors are smart to choose among the top low-cost, no-load funds (mutual funds, exchange traded funds, or closed end funds). Investors are interested in long run for higher returns.

Way to Choose the Best Mutual Funds for Long Term

This website has successful to diversify the best mutual funds selections:

• Always diversify selections. Selections may include bond funds, stock funds, and international stock funds.
• Choose low cost index mutual funds if available .These index funds typically has low expense ratio fees.
• Don’t choose best mutual funds because of the fund manager. Sometimes the best of portfolio managers know that they may perform below market averages like their indices.

Coffeehouse Portfolio

Coffeehouse portfolio is popularized by Bill Schultheis. He mentioned the portfolio in his book, The Coffeehouse Investor.

This lazy portfolio is a buy-and-hold portfolio that contains a healthy allocation to US stocks, international stocks, REIT, and bonds.

Who Is Bill Schultheis?

Bill Schultheis is an author and financial adviser. He is also a bogleheads.org reading list author. He wrote a book which titled

Vanguard Growth ETF (VUG)

Vanguard Growth ETF (VUG) is an index stock ETF (Exchange Traded Fund). This Vanguard ETF invests in US stocks of large cap companies.

This ETF's objective is to provide investment results that, before expenses, correspond the performance of the CRSP US Large Cap Growth Index.. This index fund provides a convenient way to match the performance of many of the nation’s largest growth stocks. Please check with your brokerage for additional commission.

VUG Fund Details

• Fund Inception Date: May 04, 1995
• Ticker Symbol: VUG
• CUSIP: 922908736
• Rank in category (YTD): 56%
• Category: Large Growth
• Yield: 1.30%
• Capital Gains: -
• Expense Ratio: 0.06%
• Total Assets: $ 28.61 billion
• Annual Turnover Rate: 21%

SPDR S&P MidCap 400 ETF (MDY)

SPDR S&P MidCap 400 ETF (MDY) is an index stock ETF (Exchange Traded Fund). This SPDR ETF invests in US stocks of mid-sized companies.

This ETF's objective is to provide investment results that, before expenses, correspond generally to the price and yield performance of  the S&P MidCap 400 Index. The index are companies with market cap in the range of US$ 1 billion to US$ 4.5 billion. Please check with your brokerage for additional commission.

MDY Fund Details

• Fund Inception Date: May 04, 1995
• Ticker Symbol: MDY
• CUSIP: 78467Y107
• Rank in category (YTD): 56%
• Category: Mid-Cap Blend
• Yield: 1.26%
• Capital Gains: -
• Expense Ratio: 0.25%
• Total Assets: $ 18.79 billion
• Annual Turnover Rate: 21%

Vanguard Short-Term Bond ETF (BSV)

This Vanguard Short-Term Bond ETF (BSV) is a popular short term fixed income exchange traded fund. Offered by Vanguard Group, this ETF provide decent yield for income.

This Vanguard fund seeks to track the performance of the Barclays U.S. 1-5 Year Government/ Credit Float Adjusted Index. This exchange traded fund follows a passively managed, index sampling approach.

BSV Fund Profile

• Fund Inception Date: 04/03/2007
• Ticker Symbol: BSV
• CUSIP: 921937827
• Rank in category (YTD): check
• Category: Short-Term Bond
• Yield: 1.51%
• Capital Gains: -
• Expense Ratio: 0.07%
• Total Assets: $ 21.93 billion
• Annual Turnover Rate: 0%

Updated June 2017

Morningstar analysts rank this fund with 3-stars rating. The benchmark is Spliced Barclays US Aggregate float Adjusted Index. The expense ratio is only 0.07% per year. This fee is 88% lower than the average expense ratio of funds with similar holdings.

Core Four Portfolio

Core four portfolio is popularized by Rick Ferri. He mentioned the portfolio on Boglehead Forum.
This lazy portfolio is a buy-and-hold portfolio that contains a healthy allocation to US stocks, international stocks, REIT, and bonds.

Who Is Rick Ferri?

Rick Ferri, also known as Richard Ferri, is a financial analyst, author, speaker, former adviser, and founder of Portfolio Solutions, LLC. He has written various financial articles.

Rules Of Core Four Portfolio

The rules of Core Four Portfolio is simple. It invests its 60% allocation to stocks and 40% to bonds. It mainly invest in US, international stock, REIT, and bond market.

This 4 fund portfolio is well like by followers in Bogleheads.

The portfolio can be applied with an investment in a low cost US total stock market index fund, along with direct investments in US, international stock, REIT, and bond market. It can also be implemented with low-cost ETFs (exchange-traded funds).

How to Invest

You can invest in this Core Four portfolio through Vanguard mutual funds or Vanguard ETFs (Exchange Traded Funds).

iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)

iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) is a popular bond exchange traded fund. This index fund invests in high quality U.S. corporate bonds.

This iShares fund is tracking track the investment results of an index composed of U.S. dollar-denominated, investment grade corporate bonds. This bond fund utilizes its assets to purchase U.S. investment grade corporate bonds. This ETF offer access to 1000+ high quality corporate bonds in a single fund.

This bond fund use to seek stability and pursue income. The 12-month yield is 3.25%. This top fund also has 0.15% annual expense ratio. The market price is currently traded at 0.03% discount of its NAV.

LQD Fund Profile

• Fund Inception Date: July 22 2002
• Ticker Symbol: LQD
• CUSIP: 464287242
• Rank in category (YTD): 50%
• Category: Corporate Bond
• Yield: 3.25%
• Capital Gains: -
• Expense Ratio: 0.15%
• Total Assets: $ 33.65 billion

Permanent Portfolio: 4 Fund

Permanent portfolio is one of well-known 4-fund investment portfolios. This permanent portfolio is introduced by free-market investment analyst Harry Browne in 1980.

This lazy portfolio is a buy-and-hold portfolio that contains a healthy allocation to gold. The portfolio holds equal allocations of gold, domestic stocks, short-term treasury bonds, and long term treasury bonds.

Who is Harry Browne?

Harry Browne was an American writer, politician, and investment advisor. He was the Libertarian Party's Presidential nominee in the U.S. elections of 1996 and 2000

Rules of Permanent Portfolio

The rules of Permanent Portfolio is simple. It invests its 25% allocation gold, domestic stocks, short-term treasury bonds, and long term treasury bonds.

This 4 fund portfolio is well like by followers in Bogleheads.

FMI International Fund (FMIJX)

FMI International Fund (FMIJX) is one of the best stock mutual funds. This mutual fund has delivered consistent performance. This equity mutual fund is popular among investors.

FMI International Fund (FMIJX) Profile

This FMI International Fund objective is to provide capital appreciation. The fund manager will invest mainly in a limited number of large capitalization (namely, companies with more than $5 billion market capitalization at the time of initial purchase) value stocks of foreign companies (also referred to as non-U.S. companies).

This FMI fund typically invests at least 65% of its total assets in the equity securities of non-U.S. companies. The majority of the fund's investments will be in companies that have global operations rather than in companies whose business is limited to a particular country or geographic region. The fund is non-diversified.

FMIJX Fund Details

• Fund Inception Date: December 2010
• Ticker Symbol: FMIJX
• CUSIP: 302933304
• Fund Manager: FMI Funds Inc
• Net Assets: $7.9 Billion
• Beta (3yr): 0.47
• Category: Foreign Large Blend
• Yield: 2.81%
• Expense Fee: 0.94%
• Min to Invest: $2,500
• Capital Gains: N/A
• Number of Years Up: 5 years

Couch Potato Portfolio

Couch Potato portfolio is one of well-known 3-fund investment portfolios. This coach potato portfolio is introduced by Scott Burns. It is also known as Andrew Tobias' Three Fund portfolio.

Who is Scott Burns?

Scott Burns is a newspaper columnist and author. He has covered personal finance and investments for over 30 years. He is known for creating the "Couch Potato Portfolio" investment strategy. This investment strategy advocates the use of index funds over managed funds or stock-picking.

Rules of Couch Potato Portfolio

The rules of Scott Burns’ Couch Potato Portfolio is simple. It invests its 33% allocation to inflation-protected securities, 34% allocation to US stock market, and 33% to international stock market. It mainly invest in US, international stock, and bond market (TIPS).

How to Invest

You can invest in this Couch Potato Portfolio through mutual funds or Exchange Traded Funds (ETFs). Below are the list.

Fidelity International Growth Fund (FIGFX)

Fidelity International Growth Fund (FIGFX) is a popular international stock mutual fund. This mutual fund is provide a decent dividend yield to investors.

Fidelity International Growth Fund (FIGFX) Profile

This Fidelity International Growth Fund (FIGFX) objective is to provide long-term capital growth. This mutual fund invests mainly in non-U.S. companies with growth potential. It also invests in emerging markets.

FIGFX Fund Profile

• Fund Inception Date: October 31, 2007
• Ticker Symbol: FIGFX
• CUSIP: 06828M884
• Fund Manager: Jed Weiss
• Net Assets: $1.9 Billion
• Beta (3yr): 0.78
• Category: Foreign Large Blend
• Yield: 1.09%
• Expense Fee: 0.99%
• Min to Invest: $2,500

Taylor Larimore’s Three-Fund Portfolio: 60/40

Taylor Larimore’s Three-Fund Portfolio is a well-known 3-fund investment portfolio. This 3 fund portfolio is introduced by Taylor Larimore. Taylor Larimore is well known professional investor among Boglehead.

Who is Taylor Larimore?

Taylor Larimore was labeled by MONEY magazine as "The Dean of the Vanguard Diehards." Jack Bogle, founder of Vanguard Group, calls Taylor "King of the Bogleheads." Taylor is extraordinarily well-versed after having spent most of his 83 years in the real world of finance and investments

Rules of Taylor Larimore’s Three-Fund Portfolio

The rules of Taylor Larimore’s Three-Fund Portfolio is simple. It invests its 60% allocation to world-wide stocks (42% in US stocks and 18% in international stocks) and 40% to bonds. It mainly invest in US, international stock, and bond market.

This portfolio is well like by followers in Bogleheads.

How to Invest

You can invest in this Taylor Larimore’s Three-Fund Portfolio through mutual funds or Exchange Traded Funds (ETFs).

Popular Mutual Funds in 2017

Find the popular mutual funds in 2017. This mutual fund include stock, bond, and hybrid funds.

Invest in Popular Mutual Funds

As a prospective investor, you need to ask whether you should invest in the biggest and most popular mutual funds. Can you get the extra return with these popular mutual funds? You can find many companies which provide ratings on mutual funds including Morningstar, US News, Lipper, Forbes, Money, Kiplinger, etc.

Index Funds

Index funds are popular funds in 401k plan or retirement account (IRA). Some of the best index mutual funds are provided by Vanguard & Fidelity.

Pros:

• Index funds are cheaper than actively managed stock funds in term of expenses.
• The funds may provide diverse selection of US companies than funds tracking the index such as S&P 500, etc.

Baron Emerging Markets Fund (BEXFX)

Baron Emerging Markets Fund (BEXFX) is one of the best emerging markets stock mutual funds. This mutual fund is popular among investors.

Baron Emerging Markets Fund (BEXFX) Profile

This Baron Emerging Markets Fund objective is to provide long-term capital appreciation. This mutual fund invests mainly in non-U.S. companies of all sizes with significant growth potential.
The majority of investments are in companies domiciled in developing countries, and the Fund may invest up to 20% in companies in developed and frontier countries. It is a diversified mutual fund.

BEXFX Profile

• Fund Inception Date: December 30, 2010
• Ticker Symbol: BEXFX
• CUSIP: 06828M884
• Fund Manager: Michael Kass
• Net Assets: $3.3 Billion
• Beta (3yr): 0.77
• Category: Diversified Emerging Markets
• Yield: 0.13%
• Expense Fee: 1.38%
• Min to Invest: $2,000
• Capital Gains: N/A
• Number of Years Up: 4 years

Rick Ferri’s 60/40 Portfolio: Two Fund Portfolio

Rick Ferri’s 60/40 Portfolio is a well-known 2 fund portfolio. This 2 fund portfolio is a well-known lazy portfolio. Rick Ferri is well known investor professional among Boglehead.

Who is Rick Ferri?

Rick Ferri, also known as Richard Ferri, is a financial analyst, author, speaker, former adviser, and founder of Portfolio Solutions, LLC. He has written various financial articles.

Rules of Rick Ferri’s 60/40 Portfolio

The rules of Rick Ferri’s 60/40 Portfolio is simple. It invests its 60% allocation to world-wide stocks and 40% to bonds. It mainly invest in US, international stock, and bond market.

This portfolio is well like by followers in Bogleheads.

How to Invest

You can invest in this Bogle’s 50-50 Portfolio through mutual funds or Exchange Traded Funds (ETFs). Below are the list. You can buy these investment funds through your brokerage.

Vanguard Mutual Funds

• Vanguard Total Bond Market Index Fund (VBMFX)

T. Rowe Price QM U.S. Small-Cap Growth Equity Fund (PRDSX)

T. Rowe Price QM U.S. Small-Cap Growth Equity Fund (PRDSX) is one of top rated US stock mutual fund. It invests mainly in small growth companies.

T. Rowe Price QM U.S. Small-Cap Growth Equity Fund (PRDSX) Profile

This T. Rowe Price QM U.S. Small-Cap Growth Equity Fund objective is to provide long-term growth of capital by investing primarily in common stocks of small growth companies. This stock fund invests most of its assets in equity securities issued by small-cap U.S. growth companies.

This T. Rowe Price fund seeks to invest in a broadly diversified portfolio of securities to minimize the effects of individual security selection on fund performance.

PRDSX Fund Profile

• Fund Inception Date: 05/24/2001
• Ticker Symbol: PRDSX
• CUSIP: 779917103
• Rank in category (YTD): 67%
• Category: Small Growth
• Yield: 0.00%
• Capital Gains: -
• Expense Ratio: 0.81%

Bogle’s 50-50 Portfolio

Bogle’s 50-50 Portfolio is popularized by Jack Bogle. Jack is the 88-year old founder of Vanguard Group. Vanguard is one of the world's largest mutual fund companies.

Rules of Bogle’s 50-50 Portfolio

The rules of Bogle’s 50-50 Portfolio is simple. This two funds portfolio invests its 50% allocation to U.S. stocks and 50% to bonds via index funds. It mainly invest in US stock only and US bond market only. This means he doesn’t invest in international stocks. Bogle also doesn’t invest in currency and other asset classes such as international stocks, and international bonds.

This portfolio is well like by Bogle followers in Bogleheads. Some people may consider this type of investment portfolio as moderate allocation portfolio.

How to Invest

You can invest in this Bogle’s 50-50 Portfolio through mutual funds or Exchange Traded Funds (ETFs). Below are the list. You can buy these investment funds through your brokerage.

Note: The performance may be slightly different due to expense fee, tracking error, active management funds, etc.

Mutual Funds

Vanguard Mutual Funds

• Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

Parnassus Mid Cap Fund (PARMX)

Parnassus Mid Cap Fund (PARMX) is one of the top rated stock mutual fund. This equity fund has delivered consistent returns. This fund invests in mid-sized companies.

Parnassus Mid Cap Fund (PARMX) Profile

This Parnassus Mid Cap Fund objective is to provide capital growth. The fund invests mainly in medium-sized companies. The fund's managers consider a mid-sized company to be one that has a market capitalization between that of the smallest and largest constituents of the Russell Midcap Index measured at the time of purchase. The Russell Midcap Index contains about 800 of the smallest companies in the Russell 1000 Index. The fund may also invest up to 20% of its net assets in smaller- and larger-capitalization companies.

PARMX Profile

• Fund Inception Date: April 29, 2005
• Ticker Symbol: PARMX
• CUSIP: 701765885
• Fund Manager: Matthew D. Gershuny and Lori A. Keith
• Net Assets: $2.3 Billion
• Beta (3yr): 0.84
• Category: Mid-Cap Blend
• Yield: 0.35%
• Expense Fee: 0.99%

Mairs & Power Growth Fund (MPGFX)

Mairs & Power Growth Fund (MPGFX) is one of the best large blend mutual funds. This mutual fund is popular among investors. It is one of Kiplinger’s best 25 mutual funds, Kip 25.

Mairs & Power Growth Fund (MPGFX) Profile

This Mairs & Power Growth Fund objective is to provide shareholders with a diversified portfolio of common stocks, which have the potential for above-average, long-term appreciation. This mutual fund invests mainly in US stock companies. I may also invest in securities of foreign issuers which are listed on a United States stock exchange or are represented by American Depositary Receipts.

The fund invests in high quality companies, which are characterized by earnings that are reasonably predictable, have a return on equity that is above average, hold market dominance and have financial strength.

Profile

• Fund Inception Date: November 6, 1958
• Ticker Symbol: MPGFX
• CUSIP: 560636102
• Fund Manager: Mark L. Henneman and Andrew R. Adams
• Net Assets: $4.6 Billion
• Beta (3yr): 0.94
• Category: Large Blend