Many investors know that the best mutual fund investment portfolio includes both a diversified stock fund and a bond fund, but few venture a step beyond in their quest for the best investment portfolio for the long term. In uncertain times like 2014 and 2015, you might want to broaden your horizons and add more balance to your investment portfolio.
Uncertainty in 2014 and 2015: with the stock market rally turning 5 years old in 2014, and interest rates threatening to rise, the best mutual fund investment portfolio should include more than just diversified U.S. stock funds and bond funds. Neither of these ever-popular categories looks real attractive, so you might want to reduce your holdings a bit in both. So, let’s look at the best mutual fund alternatives to add to your investment portfolio to further diversify and increase balance going forward.
Balance is the key to making your money grow over the long term while avoiding heavy losses because you had too much invested in an asset class that went out of favor. The best mutual fund types to add to your portfolio to broaden your balance fall into the stock category called “specialized equity” vs. “general diversified”. The advantage is that they specialize in particular sectors vs. the market in general. Here we will focus on the following sectors: gold, natural resources like oil, real estate, and foreign equity (stock).
By including these funds you can create the best investment portfolio because you have added a new dimension to your portfolio: funds that can march to the beat of a different drummer. For example, if the U.S. stock market falls like a rock diversified stock funds fall with it. This is not necessarily true in regard to funds that specialize in gold, natural resources, real estate, or foreign stocks. All of these have proven in the past that they can swim against the tide from time to time… and offset losses in a falling U.S. stock market.
Gold, for example, has often gone up in value in times of high uncertainty and a bad stock market. During such times gold stocks and mutual funds that invest in them have gone up in value even more on a percentage basis. This has also been the case, at times, for natural resources like oil. The price of oil can go up in a bad stock market. In such times the best mutual fund to own is one that specializes in oil (natural resources) stocks.
Rising interest rates are no friend of real estate investments, and higher rates are ALWAYS the mortal enemy of bond funds. But real estate stocks and funds can be a best investment when the stock market tanks (like in 2000 to 2002). They can swim against the tide; and sometimes foreign stock funds can outperform the diversified U.S. variety as well. If you want to go forward with the best mutual fund investment strategy, broaden your horizons.
The biggest and best mutual fund companies (families) offer a broad array of investment options. And sometimes the best funds are not the ever-popular diversified and/or bond variety. Just in case 2014 and 2015 are full of surprises, it’s a good idea to rethink your idea of the best mutual fund investment portfolio for the years ahead. Don’t demolish your present portfolio. Just consider a few minor changes by adding some funds that could enhance balance and stability in your total portfolio.