I'm Jan Dahlin Geiger, CFP®, MBA , author of "Get Your Assets in Gear! Smart Money Strategies." A Certfied Financial Planner™ practitioner since 1988, I've been quoted in the Wall Street Journal, MSN Money, USA Today, Reader's Digest, and SmartMoney Magazine. I have been on the board of directors of the Financial Planning Association (Atlanta chapter) and practice as a fee only planner with a Registered Investment Advisor firm. Additionally, I am the financial expert on the cable TV show, "Living Life With Style" on WCTV-24 in Atlanta and the internet radio show "Wall Street Chic."
Diversification and asset allocation are both crucial to have an effective all weather portfolio. Diversification means having a number of different companies to invest in. That is most easily done with mutual funds. Asset allocation means having many different asset categories, e.g. large cap growth, large cap value, mid cap, international, mid term bonds, real estate, etc.
If you go with a big mutual fund family like Fidelity or Vanguard or T. Rowe Price, it doesn't cost an extra cent to be well diversified and well allocated. They typically will have a per fund minimum of $250 to $1000. Once you hit the minimum, you can be in that fund. So for example, a $10,000 investor could choose 10 different funds with $1000 in each one.
In my opinion, if you are a small investor, you don't belong in hedge funds, period! Any that are available in denominations small enough for small investors are pretty crummy after you consider all the fees and expenses. Most small investors don't understand them and like Warren Buffett wisely says, "I don't invest in anything I don't understand." Leave the hedge funds for the rich folks. I am worth many millions, I am a professional in this business, and I have no hedge funds in my personal portfolio.
If you are just getting started or you don't enjoy spending time on research, index funds are the way to go. The vast majority of investors would be so much better off if they just concentrated on asset allocation, chose a strategy that is a good match for their risk appetite, then stuck to it. Most investors hop in and out, always at the wrong time so that they typically buy high and sell low. In my opinion, 95% of the folks out there are way better off chosing mutual funds than individual stocks or bonds.
Right now it is really smart to begin looking at REITs for additional asset allocation. Buy low! They are good and low right now. Increase your allocation to large cap growth. It will outperform mid caps and small caps over the next year in my opinion. International is also a good place to go. Keep bond maturities short. If you are doing money markets, most investors would be way better off in muni money markets right now than taxable accounts. The after tax yield is far better.
If I can provide more detail, don't hesitate to let me know.
With warm regards,
Jan Dahlin Geiger
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