A number of people invest in mutual funds for retirement in order to live the post-retirement life without any hassles. Here are the basic things you should be keeping in mind while putting a portfolio of mutual funds together.
You need to decide whether you are willing to be aggressive, moderate, or conservative. You should consider the moderate option if you are not retired and willing to take risks. You can go for moderate investment if you are young and want to take a considerable amount of risks in order to gain potential high returns.
Almost 60% of the stock dollars enter the diversified U.S. stock funds whereas 25% to 30% enter international funds. Hence, it is recommended to give a consideration to the combination of gold, real estate, and natural resources specialty funds for adding balance to the portfolio.
Say no to long-term and low-quality funds
While choosing mutual funds for retirement, you should say no to low-quality and long-term funds. Though they claim to offer high returns, they come with higher risks. You should be focusing on intermediate-term high-quality funds. You should not be investing in tax-exempt funds if you do not have a higher tax bracket.
Keep an amount in market mutual funds
For the sake of liquidity, flexibility, and safety, it is recommended to keep some money in money market mutual funds. You should be cautious about the low-interest rate environment and make an allocation to the money market funds equal to that of the bond funds.
Review the whole mutual fund portfolio
You need to review the entire mutual fund portfolio. You need to have 20% in the money market funds, 20% in bond funds and 60% should be allocated to stock funds. This will keep you in a moderate position.