What role do stocks play in your investment portfolio?

Many investors want to include some equity or stock investments in their investment portfolios. They might buy some common stocks or equity mutual funds or a blend of the two. However, mutual funds and stocks are not the correct investment option all the time.

Who are the potential investors of stocks and mutual funds? 

People who prefer to invest in stocks and mutual funds are those who frequently:

• feel at ease with assuming some risk to go after higher returns
• have an extensive time period (they have a long period to invest, hence they can select the time to sell)

Who are less probable to invest in stocks and mutual funds? 

People approaching retirement or any other occasion when they would want their money don’t wish to invest in mutual funds and common stocks. They shift their money to investments with a steadier or assured return. For instance, they might invest in preferred stocks as a means to generate a stable flow of income.

Stock diversification in your portfolio 

Stock diversification in your portfolio refers to having a blend of various types of stocks in your portfolio such as stocks of companies from various sectors. It can also suggest investing in holding company stocks or equity mutual funds. Through diversification of your equity investments, you can minimize risk and expect improved returns.

Are mutual funds and stocks good options for you? 

The right blend and categories of equity investment might vary as time passes by. Question yourself:

• Is there any logic to raise or lower the level of mutual funds and stocks in my portfolio?
• Has the time come to modify my equity investments - either through buying or selling?

You should keep in mind that your investments should suit your age and risk tolerance level. These might vary with time. Make arrangements to evaluate your equity investments once every year as a minimum either without help or with the assistance of a financial counselor