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Investing in a mutual fund is a microcosm of investing in life: Don't put your eggs in one basket. What do I mean by that suggestion? In life, this means don't devote all your energies to one endeavor. Example: if you lose your job without other priorities you can become bankrupt emotionally.

A mutual fund is not placing all your eggs in one basket in that the fund is a portfolio of stocks, bonds or stocks and bonds that are professionally managed. If your investment was in one stock, your investment return is based on that one performance.

In a mutual fund, a stock is one of many other stocks in the fund. If the price of that stock dips severely the value of the fund may not in that this stock represent a miniscule percent of the entire investment.

There are no typical returns in that there is an element of risk. The eggs not in one basket is a chief advantage in minimizing loss. With returns of the fund, why not assess your investment tempermanent? For example, do you see a small dip in the prive of a stock as simply a paper loss, are you losing sleep with anxiety or somewhere in the middle?

If you can handle risk emotionally, invest in a stock fund offering the following...the greater the risk the greater the return.If you less inclined to risk, consider a fund that is a combination of stocks and bonds. If you are basically uncomfortable with risk, choos a bond fund with bonds that have a high rating. If you are risk averse, keep your money in a CD.

Lastly and most importantly, choose a broker with your best interests and commission as his top priority. This broker will guide you by thoughtful questioning what your investment temperament and what to recommend accordingly. I hope this information was of value. Good luck!

Learn more about this author, Joseph Wardy.
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