We are wise to not put all our investment eggs in one basket. Enron went bankrupt nearly a decade ago. It had been one of the very most highly-regarded businesses and stocks on the planet, until it suddenly wasn't.
Mutual funds, Separately Managed Accounts, Exchange-Traded Funds, and Unit Investment Trusts all offer convenient ways for investors to diversify their portfolios and avoid Enron-like debacles. They also offer the chance to make use of professional portfolio managers who can/should know a lot more about how to invest than the average person.
In addition to choosing which type of product to use, though, a prudent investor must determine which of the sometimes thousands of choices within a product category are worth using. Owning a mutual fund might offer more diversification than you would get for yourself, but it should also be "better" diversification.
It is a good idea to hire a trusted and knowledgeable advisor to help you decide what products to use, and especially to find the best providers of the chosen product type. You can do it yourself, of course, but make sure you have the time and tools and discipline to do it well.
An investing and financial strategies blog offered by Gary Partoyan, veteran financial advisor and owner of Potomac Wealth Strategies, LLC.
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