Building a mutual fund portfolio is how we build that plan, a long-term financial goal where low-risk investments are all pooled together to create steady, incremental growth. This way you won’t have to worry–it’s just about adding to your fund over time and letting it sit. Active investment–buying and selling stocks on hunches, always looking out for the latest Apple–is kind of like going to the slot machines: there’s a chance you’ll win something, but the house usually wins. So instead of being the gambler, choose to be the house. That’s how you build your mutual fund portfolio, based on market conditions, not on a crazy chance.
First off you have to ask, what’s your age, and what’re your goals? “Let’s start with the concept that when we’re young, have few assets, are willing to take risks, and seek capital accumulation, we should emphasize common stocks,” says Jack Bogle, founder of the Vanguard Group and inventor of the fist index fund. “But as we age, our assets grow, we gradually become more risk averse, and increasingly seek income, we should emphasize bonds.”
In other words, when you’re young and have little money, it doesn’t really make sense to invest in government bonds, which have low-interest rates and can’t be easily sold. But if you’re older and have a good amount of savings bonds make sense, since even incremental interest is enough to make you a living if you’ve accumulated enough. Portfolios are all about goals: Are you looking to make money in the short term and have little to lose, or are you building a college fund for your newborn baby? Whichever you choose will determine what kind of balance you want.
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