In the first posting of my blog we talked about building a good mutual fund base in your portfolio. This should be done first when starting to invest. If you have not done this, then you should be getting that done soon and fixing your mistake when starting your portfolio.
For many people they simply do not know where to begin and that is what we are going to talk about in this posting. Getting a good start and building on it will give you that good base so that later you can start venturing out and spreading your wings later. Remember, this will not happen over night and it is also dependent on the amount of money you have to initially invest and what you feel comfortable with in making your commitment to monthly contributions to your investment portfolio.
First I would give a general statement that about 1/3 of your portfolio should be in low to moderate risk mutual funds and keep that ratio throughout your investing lifespan. This giving you 2/3 of your portfolio to branch out with into other areas. Some may be low risk, some may carry a very high risk and everything in between as well as investing in to specific sectors of the market including some individual stocks later on as you become more savvy.
Secondly, check with your Financial Advisor as to the best kind of account for you. The types of accounts you may have choice of include are; Brokerage Accounts, Traditional IRA, Roth IRA, and the more rare Inherited IRA. Each comes with their own sets of rules, pros and cons, limitations and tax benefits. Your financial advisor should review these with you and share this information about each type of account so that you can decide together where is the best place for you to start. One hint I will give you up front is, if you plan on early retirement prior to age 59 and a half a Roth IRA may not be a good place for you. But again talk to your financial advisor about this. The only way to get an Inherited IRA is if you are the sole beneficiary of someone else's IRA. This might be from a parent or other family normally. It is NEVER a good idea to cash out an IRA you inherit from a family member as you will get socked with a 30% tax penalty.
So now you ask, what are some good mutual funds of which to start my base with in my portfolio. Well there are literally tons of them. Remember to first pick a family of funds and stay in that companies mutual fund family. Again, some good family of mutual funds would include Franklin, T. Rowe Price, Fidelity, Principle, Vanguard, JP Morgan, Oppenheimer. My personal portfolio mainly consist of Principle and Franklin family mutual funds. So lets look at some of their funds together.
FGTIX is a Franklin family mutual fund. I feel this is a good place to start with many newer investors for several reasons. It is a mutual fund made up of many other mutual funds combined and about 12% bond hold. This making this a very balanced choice and at a reasonable price per share.
AMECX is in the America Funds family and has been in my personal portfolio for many years. Good steady annual returns. This fund has a nice blend of both stocks and bonds which you want to see as part of your good base in your portfolio. The price per share is good on this mutual fund making it attractive and has a good Morning Star rating.
ABALX is another America Fund family member. I prefer AMECX that I have in my personal portfolio a little better. I think it is a little more aggressive and carries a little better Morning Star rating. But this would not be a bad selection either in forming the base of your portfolio.
Make sure and check these mutual funds out. Look at the performance and holdings in these funds. That will give you a good idea of the kinds of things you are seeking in building your base. After forming a good base in your portfolio with a balance that you are comfortable with then you will be ready to branch out more and start spreading you wings. I will be talking about spreading our wings in the near future.
If you have any questions for me, just let me know and I will be happy to give you my opinion. However as always, review things with your personal financial advisor before making any final decision.
Gus
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