Planning for investing in one fund? Here’s How to Go about It

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You might have heard experts advising you not to put all your investments in one mutual fund at once. Though it is a useful piece of advice with regard to investments, there are exceptions to it too.

If you have just started your career in the stock market or are looking for a reliable core holding to bide your time for a variable portfolio, putting your money on a single mutual fund can provide you with a solid platform to make a beginning on a high note. The only catch though is that you need to be clear about the fundamentals of investing.

Using Balanced Funds

Balanced funds or hybrid funds play a key role in balancing the underlying investment assets such as cash, bonds and stocks. Thus, it represents one of the simplest forms of asset allocation.

Usually, there are two kinds of objectives associated with balanced funds – aggressive and conservative or moderate. While most investors perceive it as core holdings related to one’s mutual fund portfolio, beginners may consider it to be their first fund. Because these funds are professionally managed and are diverse by nature, they bring about a win/win situation for an investor.

Choosing Target-date Funds

As the name indicates, target date funds correspond to a specific date. These funds are common in retirement plans. So, you may consider it if you are planning to invest for retirement. With the retirement date approaching close, the fund manager will systematically reduce the stock allocation and, at the same time, also allocate more cash and bond over time. In the process, it switches the mode of allocation: first aggressive to moderate and then moderate to conservative.

Choosing Index Funds

While thinking of concentrating your wealth in one fund, index funds, due to passive management, make for a wise choice. It comes with added benefits like low expenses and broad diversity.

Another advantage, which index funds bring to the table for new investors, is that it allows the use of the structural pattern which corresponds to core and satellite portfolio. Moreover, index funds also provide new investors with an opportunity to get more exposure to a total stock market index.

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