Basically, I’m asking this:

If I have in , is it safe during this market down-turn?

 

  • Synchrotron 1:04 pm on August 17, 2010

    Short answer: No.

    Longer answer: Depends.

    Mutual funds are typically a single investment vehicle comprised of a basket of stocks. If the components are volatile, the whole is also volatile.

    But, depending on the fund, it might not be comprised of stocks or it might be partially stocks and partially other investments. You also need to weigh the manager and their ability to minimize the volatility.

    You can compare a fund’s volatility by looking at it’s Beta. That’s a direct comparison of the fund against the market. The market is a 1. If a fund is higher than 1, it’s more volatile (a 1.03 would be 3% more volatile) and less than 1 it’s more stable (a 0.93 would be 7% more stable).

    You can also look at standard deviations to determine the relative risk-reward to a particular fund.

  • Iqbal E 1:04 pm on August 17, 2010

    Mutual Funds are investments in the stock market as such they are exposed to the vagaries and violtality of the stock market. However, you should not worry if you are well diversified and in the market for the long term.

  • Steve D 1:04 pm on August 17, 2010

    In most cases, mutual funds are not as volatile as individual stocks. Their volatility depends upon what type of fund you invest in. A balanced fund, for example, invests in a mix of stocks and bonds (and maybe money markets). Because bonds are much less volatile, you would not be as affected by wide market swings (this works both upside and downside). However, because of the lowered volatility, your returns are lower.

    If you invest in say a tech fund, you might actually see higher volatility if, say, the tech industry (where the vast majority of funds would be invested) was undergoing some industry-specific events (much like investing in a fund that concentrates on the investment industry today).

    Just remember, you give up return for safety. Historically, teh stock market averages 8% appreciation annually while the bond market is lower at 4.5-5.0% annually. If you are in the market for the long haul, it is usually advised that you can take on more risk for more reward, while if you are shorter term, you want to preserve principle.

  • attari49 1:04 pm on August 17, 2010

    No, if the stocks in the mutual fund belong to very many different business sectors, they are not as volatile as individual stocks.