Multiple Assets or Mutual Funds? What’s your pick?
There are different kinds of investors who understand and believe in different types of investments. A fundamental difference lies in the understanding and knowledge of the various financial instruments. The first kind of investor from the graph believes in multiple investment avenues and the other investor believes in focusing on Mutual Funds. One has a clear understanding of the investments and the other has a diversified composition of his investments. The difference is explained below.
Master of All:
The first type of investor believes in diverse allocation of his investment. He puts more effort into dividing his investment, believing it will yield him more benefits. This type of investor spends more time allotting and distributing his assets instead of spending time on research. This could lead to confusion if the investor does not track the varying market development or the progress of his/her own portfolio. It is like applying for countless entrance exams instead of a centralized one before taking up a course. Investing is more than trying to diversify assets; while investing in the right assets at the right time is important, it can be tricky and very stressful.
Master of One:
The other type of investor, invests in Mutual Funds as the primary investment vehicle. Mutual funds collect money from investors and involve expertise to invest in various instruments such as stocks, bonds, money market instruments and similar asset. Avoiding multiple avenues, this investor opts to create a centralized participation by believing in taking the help of expert fund managers for mutual funds. He understands that too many directions only makes you go in circles and many divisions only creates chaos, hence, he invests in asset class where he has clarity and confidence. This type of investor minimizes the diversity of his investments in Mutual Funds for better management. He chooses to focus his work in one direction rather than divide the work into numerous bits.
Which one are you ? A master at one or an all-rounder?