Читать книгу Personal Finance After 50 For Dummies - Eric Tyson - Страница 103

Decades ago the mutual fund industry was beginning to reach critical mass and developing and expanding its fund offerings. The large fund companies soon had dozens of funds, and increasing numbers of investors found choosing among them overwhelming.

Informed individual investors understood the concept of diversification and knew they should invest in a variety of funds that gave them exposure to different types of assets. And fund company representatives often found themselves being asked by investors for advice about what basket of funds they should invest in. So fund companies created funds of funds — that is, single funds comprising numerous companies’ funds.

For example, consider the Vanguard Star fund, which was created in 1985. It’s made up of ten Vanguard funds, including domestic and foreign stock funds, bond funds, and a money market fund. Stocks comprise about 62.5 percent of the fund (and about 30 percent of those are foreign), bonds about 25 percent, and money market assets about 12.5 percent. Of course, one size doesn’t fit all, but for investors seeking global diversification and an asset allocation similar to this fund’s, Star offers low costs (its annual operating expense ratio is just 0.31 percent) and relatively low minimum investment amounts ($1,000).

In addition to the asset allocation, expenses, and riskiness of any fund of funds you may consider, also be sure to consider the tax appropriateness of the fund. Funds of funds that invest in bonds usually aren’t very tax friendly because they hold taxable bonds. Therefore, such funds generally only make sense inside of a retirement account or for lower-tax-bracket investors investing outside of a retirement account.