The trend is looking positive for average investors, as studies indicate that they’re using a wide range of their investment vehicles to fully diversify their portfolios: life-cycle funds, international mutual funds, exchange traded funds (ETFs) and U.S. equity and bond funds. This new trend also shows that the increase into a variety of securities has caused the new net cash flows into stock-based mutual funds to decline since their all-time peak in January of 2000. Net inflows into these funds now average about $11 billion a month, which is down from a high of $50 billion a month at the start of the millennium, reports Investment News.
Some observers suggest that a large chunk of the money that was formerly invested through equity mutual funds now is going into ETFs. Advisers come in handy here because while there are more investment options available, experts must educate the individual investor on how to use them correctly. And according to a recent study, financial advisers are doing an excellent job educating their clients, as clients are diversifying their portfolios like never before. Diversification is one of the best ways to protect a portfolio from market volatility and corrections.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.