Should I diversify my mutual fund holdings? | TigerDroppings.com

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Thomas Hudson
LSU Fan
Dallas
Member since Dec 2006
7264 posts

Should I diversify my mutual fund holdings?


Currently have a fair chunk of money in Vanguard's VSMGX fund. I'm not unhappy with it's performance, but should I spread future investments around between different funds? Or is this diverse enough in it's own right?

To the extent it's relevant: aside from this account, my 401k is maxed and I don't qualify for Roth.








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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
29988 posts

re: Should I diversify my mutual fund holdings?


What exactly do you mean by "diversify"? Just spreading your investments around multiple funds isn't necessarily diversification.

In finance, "diversification" refers to investing in a variety of assets that have returns that tend not to move in synch with each other. So if you have one fund that invests mostly in US blue chips, buying a second fund that does essentially the same thing doesn't really do that much for you.






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Thomas Hudson
LSU Fan
Dallas
Member since Dec 2006
7264 posts

re: Should I diversify my mutual fund holdings?


Fair point, and I should have clarified. I mean should I move more into funds with international or bond positions, etc. based on the current holdings of the fund I'm in. To me it seems pretty darn spread out, but putting my eggs into one basket always gives me pause.





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Thomas Hudson
LSU Fan
Dallas
Member since Dec 2006
7264 posts

re: Should I diversify my mutual fund holdings?


Double post.


This post was edited on 1/6 at 9:45 pm


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Hoodatt
LSU Fan
Member since Feb 2005
1706 posts

re: Should I diversify my mutual fund holdings?


Diversify your mutual fund holdings into a mix of mutual funds that have their primary investment in each of the following four areas:
Stocks - income producing
Bonds
Short -term money funds
International

Try to keep a balance in the mix, roughly 25% each.



This post was edited on 1/7 at 7:15 am


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yellowhammer2098
Alabama Fan
Tuscaloosa, AL
Member since Mar 2013
513 posts

re: Should I diversify my mutual fund holdings?


Mutual funds are diversified compared to stocks.

BUT

I put my money in a variety of mutual funds still.






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BACONisMEATcandy
LSU Fan
Delta, Amex, & Über Threads
Member since Dec 2007
41646 posts

re: Should I diversify my mutual fund holdings?


quote:

I don't qualify for Roth.


I need this problem






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Clyde Tipton
LSU Fan
Planet Earth
Member since Dec 2007
21694 posts

re: Should I diversify my mutual fund holdings?


quote:

Mutual funds are diversified compared to stocks.

BUT

I put my money in a variety of mutual funds still.






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LSUTexan78
LSU Fan
Member since Sep 2007
2734 posts

re: Should I diversify my mutual fund holdings?


quote:

I don't qualify for Roth.


Research back door Roth IRA conversion strategy






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Thomas Hudson
LSU Fan
Dallas
Member since Dec 2006
7264 posts

re: Should I diversify my mutual fund holdings?


quote:

Research back door Roth IRA conversion strategy

I looked into this a few years ago. Is that option still available?



This post was edited on 1/7 at 11:03 am


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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
29988 posts

re: Should I diversify my mutual fund holdings?


quote:

I mean should I move more into funds with international or bond positions, etc. based on the current holdings of the fund I'm in. To me it seems pretty darn spread out, but putting my eggs into one basket always gives me pause.


According to the marketing snapshot, the fund holdings on 11/30 were:

Vanguard Total Stock Market Index Fund Investor Shares - 42.4%
Vanguard Total Bond Market II Index Fund Investor Shares - 31.9%
Vanguard Total International Stock Index Fund Investor Shares - 17.7%
Vanguard Total International Bond Index Fund Investor Shares - 8.0%

So you have exposure to a big US stock market index, a big US bond market index, and the non-US equivalents of both. This is plenty diversified for most with respect to stock vs. bond and US vs. non-US holdings.

The only nondiversified part here is that everything is Vanguard. There's more complexity there but if you are concerned about international and/or bond positions, it looks like you got 'em already.






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