How Three Funds Compensate for a Risky Trait
A portfolio can include dicey holdings yet be conservative overall.
Mutual funds come in all different shapes and sizes, and there's no one formula for success. Nonetheless, there are some characteristics that always require a second look.
Many of these attributes relate to risk. Funds with great results but loads of volatility, for example, demand closer examination. It's necessary to figure out if the manager can handle such volatility or if the fund is a ticking time bomb.
Meanwhile, fundamental risks evident in a portfolio are as important. For example, highly concentrated funds are more vulnerable to problems in just a few stocks. Funds that invest in the smallest-cap stocks have their own special considerations, as do those that own emerging markets and high-yield bonds.
Bridget B. Hughes does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.