Diversifying Your Investments

More and more people are buying mutual funds and individual stocks, hoping to ride a bull market into a comfortable retirement. For many, the conservative approach that limits risk while creating a decent return provides a much-needed comfort level. For others, taking those calculated risks toward aggressive growth is the best way to make their money work. But as all investors build their portfolios, they should remember three words: diversify, diversify, diversify.

1. How can I choose stocks that will perform well?

2. What are the advantages of mutual funds?

3. What is a no-load fund?

4. What is dollar-cost averaging?

5. Should I invest in hard assets like gold, silver, and art work?

6. Can I invest on the Internet?

7. But isn't it risky to invest on the Net?

1. How can I choose stocks that will perform well?
Careful analysis is the key to picking companies to invest in. Investors consider the company's earnings history, stock outlays, dividends, equity returns, and debts. The nature of the business is also a prime factor for many investors. The most fundamental advice is to diversify the investment portfolio, putting money in several companies to avoid significant losses should one perform poorly.

2. What are the advantages of mutual funds?
Mutual funds generally consist of a combination of stocks, bonds, and securities and are run by professional managers. Mutual funds offer the investor a convenient means of limiting risk because the investment is spread over all companies in the fund. Investors can also shop around for funds that meet their goals and comfort level for risk.

3. What is a no-load fund?
No-load funds do not charge a commission to purchase shares. These funds are often purchased directly from the mutual fund company rather than from a broker. For investors with the know-how and time to research funds, no-loads save money by eliminating the broker's fee.

4. What is dollar-cost averaging?
Dollar-cost averaging simplifies buying and selling stocks or mutual funds. Investors put in a set amount of money at regular intervals regardless of price changes. Over time this can work well. But investors still must pay attention to the stock to make sure it remains a solid investment at a fundamental level.

5. Should I invest in hard assets like gold, silver, and art work?
These hard assets can make good investments during periods of high inflation. In recent years lower inflation rates have made financial instruments a better choice than most hard assets. So unless investors fear a return to high inflation, gold may not glitter as much as stocks and bonds.

6. Can I invest on the Internet?
Yes. The Internet is becoming a valuable tool for investors. Many sites offer the ability to track stocks, play market simulations, and even bypass a broker to trade online. This fast-paced approach to playing the market will gain popularity and utility as more people use the Net, more investment sites appear, and technology gets faster and easier. Visit our list of essential investing sites for a great list.

7. But isn't it risky to invest on the Net?
Not for an experienced hand. The best sites are those of reputable investment houses, mutual fund companies, online services, and financial institutions. The best content is produced by experts with insight into the workings of the market. Interactive tools make it easier to calculate risk and potential rewards. Online security is an issue for actually making buys, but reputable firms offer secure transactions and password protection.

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