You Can Dial “Risk & Return” Up or Down
Experts say your most important investment decision is to strike the proper balance between growth and safety. Using mutual funds, that means picking an Aggressive, Conservative, or “In-between” Fund.
- Growth funds put most of your savings in investments, such as stocks, that are expected to grow quickly, but are risky.
- Conservative funds put most of your savings in investments that have less risk but lower expected returns, such as bonds.
- Moderate funds put your savings in investments that have expected returns and risks somewhere in-between.
Experts recommend a shift from growth to safety as you age. Target Date Funds (TDFs) do that for you:
Some mutual funds invest your savings in a particular sector, such as an:
- Industry, such as technology or energy stocks
- Region or Nation, such as Europe or China
- Asset, such as stocks, bonds, or real estate
- Group, such as small companies or “emerging markets” (overseas developing economies).
Sector funds are less diversified and thus more risky, but allow you to use mutual funds to invest in a particular “sector.”
Here is a video from the Khan Academy that explains more about mutual funds: