Diversification among asset classes is an important tool to control risk. The process of diversification is affected by the size of each portfolio. In our opinion, a portfolio valued at one million dollars can attain sufficient diversification. The smaller the portfolio, the more difficult it becomes to achieve adequate diversification.
Mutual funds are vehicles by which investors can achieve the necessary diversification with less than one million dollars. We think that investors should search for socially responsible funds with the characteristics that we believe can gain good returns over time. Look for experience, e.g., a record of performance generated by the same portfolio manager over a reasonably long period, such as ten years. Avoid sales charges ("load") and ascertain that management fees are competitive. Place more emphasis on the long-term record rather than recent performance. If risk is important to you, consider funds that have relatively low volatility.
We hope that you find these guidelines helpful when the time comes to make your investment decisions. We wish you success in this challenging endeavor.
1. Balanced composite returns are asset-weighted, time-weighted returns for all portfolios of at least $1,000,000 in value of clients who have been clients for at least one full calendar quarter, except portfolios affected by a material margin debt position. 2. All returns represent Total Return including the reinvestment of dividends and interest. 3. Net performance is net of transaction costs and net of advisory fees. 4. Returns of Indices are extracted from 2010 Ibbotson Stocks, Bonds, Bills and Inflation (SBBI) Classic Yearbook (Morningstar Inc., Chicago, Illinois). 5. Past performance is not to be construed as a guarantee of future performance.