| An investor opts for a mutual fund investment | | | | whether your investment would be specific to a |
| for the sole purpose of pooling resources with the | | | | certain sector or not. If it is not, plan to increase |
| ultimate aim of making profits from it. However, a | | | | your investment over more industries and |
| wise investor should be informed that, every | | | | sectors. |
| investment carries its own risk which would need | | | | Many investors make the mistake of only |
| to be reduced at all costs. To reduce this risk, | | | | investing in the companies that they think are |
| one could opt for diversification, in order to | | | | making profits, or which have strong financial |
| minimize the risk to a portfolio. | | | | base, only to wake up one morning to find them |
| You will need to invest in instruments that are | | | | down. Worldcom and Enron best illustrate my |
| affected by different market conditions, i.e. the | | | | point here. It is important that a portfolio manager |
| stocks, options and bonds that are not related to | | | | splits the invested dollars into the different |
| each other. You should also invest in both sector | | | | options, bonds and securities, which would provide |
| and industrial options in order to balance your | | | | them with a balance of the risk involved. |
| investment. A wise investor would also want to | | | | There are various business models for managing |
| consider investing in real estate as well as entering | | | | a diversified investment portfolio that are available |
| into business partnerships with other investors. | | | | market today. These models are dependent on |
| A mutual fund investment is built based on the | | | | the sector the investment is based, the risk that |
| diversification principle, However, the investment | | | | is associated to that sector, the size of the |
| will allow you to diversify within a certain sector, | | | | company involved and its financial base, among |
| either the retail sector or the industrial sector. | | | | other factors. |
| Check with the portfolio managers to see | | | | |