How to build a mutual-fund portfolio

Article Excerpt

Now more than ever we think you need to invest in only the highest-quality mutual funds. Here are some keys to building a sound portfolio with these mutual funds. Diversify. Spread your portfolio out over several funds that practice a variety of investing styles. Vary your exposure to each style to reflect your individual financial circumstances, temperament and goals. Invest in just a few funds. We feel most mutual fund investors should own no more than five funds. When you own a larger number of funds, you increase your risk of becoming too diversified. The more funds you own, the more likely you are to earn a return equal to the market average, minus the 2% to 3%, or more, that it costs to invest in a fund. As well, owning too many funds guarantees mediocre results. With too many funds, you can lose track of what you own, and you may wind up holding when you ought to sell. If you…