Instead of putting “all your eggs in one basket,” mutual funds automatically spread your investment dollars among many holdings. Not only does this mitigate your overall risk, you can potentially enjoy the benefits of many strong holdings.
Diversifying your mutual fund investments themselves can also help you achieve different goals. For instance, you might select one set of mutual funds for your retirement plan and another for shorter-term investing goals.
Because stock prices can fluctuate widely in the open market, independently picking single stocks can carry a large risk. While there is potential for good return, there is also significant risk to losing invested capital. Mutual funds spread risk among many holdings; as such, investors can benefit from the return of all of a fund’s holdings while having a protective “cushion” should some holdings not perform as expected.
Depending how much market fluctuation you are willing to withstand in your personal portfolio, you can find a mutual fund to fit your own objectives. Stock funds typically offer higher returns (and higher risks), while bond and money market funds are less volatile. You can read more about different funds here.
Actively managed mutual funds have professional portfolio managers overseeing their holdings and performance. Portfolio managers may have years of experience and success behind them, and have the resources to fully examine the companies in which they invest (something most individual investors don’t have the time or know-how to do).
Wasatch Funds' portfolio managers practice active fund management. Compared to index funds that simply mirror a market sector’s makeup, Wasatch Funds portfolio managers perform deep due diligence for each holding they select. They research company financial statements, interview company management, and even check out a company’s competitors to truly understand the earnings potential of a company and get a feel for its line of business. Our on-going practice of collaborative research is the backbone of our investment process, our overall philosophy, and our history of fund performance.