I have a good Base. What next?

Once you have a good base started of with you and your financial advisor are comfortably with.  Then it is time to start spreading your wings just a little and building upon your portfolio.  So how do you do this is your question?  The answer is pretty simple really and I think your financial advisor will agree.  You need to start by broadening your base with mutual funds that focus in other areas of the market.  By this I mean focusing on looking at other mutual funds that focus in different sectors such as Large Cap, Small Cap, Foreign, Healthcare, Bonds, and Emerging Markets.  All have a place in your portfolio and you should not limit yourself to just one of these choices.  When some are up and making you money, some may be down or staying steading and not making you much money.  But remember, the market is always changing and you need to be there to collect on these profits as the market shifts.  Now you ask what are the differences in these markets.  There is a lot of good information on the internet that will explain what each one is.  I will give you a brief summary, but you need to do further research yourself and talk it over with your financial advisor for a more in-depth understanding.  Different types of mutual funds will be focusing on different sectors of the market and will contain many stocks from within that sector.

Large Cap:  These are going to be your big companies.  Things like Coke (KO), Apple (AAPL), Exxon (XOM).  Right now the market is doing EXCELLENT with large cap markets and is currently a good place to be invested.  But remember things change.

Small Cap:  This is similar to your Large Cap Mutual Funds, but they invest in smaller companies within the stock market and tend to stay away from your giant S&P 500 stocks.

Foreign:  This is exactly like it wounds.  They are mutual funds that invest in overseas markets and companies such as Japan, China, England, etc.

Healthcare:  One thing you can always count on is Healthcare.  This is a market that is here to stay.  With the aging population and continued growth of our country you know that people will always need healthcare...Obamacare or not.  These mutual funds would include any healthcare sector company like pharmacies, hospitals, drug companies, medial property investors, health insurance companies, etc.

Bonds:  The bond sector is live government bonds.  The kinds of bonds like you may invest in through your bank.  I do not suggest bond investing through the bank, but I do suggest bond mutual funds.  The rule of thumb...when the stock market is up bonds go down.  When the stock market goes down, bonds increase in value.  Having both in your portfolio helps to balance your holdings and helps protect them to some extent.

Emerging Markets:  These funds are very similar to Foreign Market Mutual Funds.  But here is the biggest difference.  They invest in specific country's markets or a group of certain countries.  Not a lot of companies from all parts of the world like a Foreign Mutual Fund.  By this I mean the Emerging Market fund you purchase may only invest in Mexico companies, or Japan, or Middle East or African companies, or they make two countries like Mexico and Japan etc.  Emerging markets tends to be a little volatile.  Most are down in the market right now.  But when is a good time to buy?  Yes, when prices are low.  Wait for your big gain and collect your cash.  Personally I got out of the Emerging Markets Funds due to my retirement and their volatility and wanted to take a more conservative approach.  But there is justification in this market and they can make you lots of money if you invest at the right time and are willing to wait to collect a big payoff.  Most financial advisors will recommend them.  But you need to be at the right place in your portfolio to add one.

My recommendation right now as the market looks today and what is forecast for the future at least through spring of 2014.  Start with a good Large Cap Mutual Fund.  Get some money in that sector that you are comfortable with.  Try to stay with a fund within your already established family.  But there are many good funds that also may not be in your current family of stocks.  Lets say your portfolio that you have begun with is in the Franklin Fund of families.  If you invest enough in the Franklin family of funds you will get a discount on your purchases.  But it is not always bad to go outside your family of funds either.  I actually have a portfolio of 2 main families of funds.  Franklin Funds and Principle Financial Funds.  I then have a few other mutual funds that are outside my main two families.  But do not make every purchase and investment you make always from a different family of funds.  You would be doing yourself a disservice.  What are some good Large Cap Funds I could suggest?  AMANX which is up 25.33% year to date.  I have personally owned this fund since 2006.  Went through the recession of 2008 when the market crashed and I am still up 81% on this fund in my portfolio.  Good history and has been a good profit for me.  Only issue, VERY small family of funds.  Lets take a look at FGRAX from the Franklin Fund Family (recommended family).  This fund has some great holding that I like and is up 30.98% year to date.  I personally just added this fund to my portfolio after dumping a couple of other individual stocks.  Another to look at is CMNWX.  This is a Principle Financial Fund and doing quite well as it is up 21.89% for the year.  Lets look at FLCSC from the Fidelity family (recommended family).  Has been doing great this year and is up 30.42% year to date.  Took a bath in the recession of 2008 as all Large Cap Funds will when the market is down.  But it has made a great recovery.

These are just a few of thousands of Large Cap Mutual Funds for you to consider in making your choices as you start to broaden the base of your portfolio.  I will continue down the path we have started in broadening the base of your portfolio next time.  I will make sure to talk about Small Cap Mutual Funds next time, which is very important to help broaden the base and make your portfolio more stable.  Any question, just leave a comment and ask or email me directly.

Gus

Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.