Take A Broader Investing Stance

Shawn is in a mutual fund which invests in gold mining. Shawn wonders if he should get out of this mutual fund based on the volatility of gold.

QUESTION: Shawn in Denver is in a mutual fund which invests in gold mining. Shawn wonders if he should get out of this mutual fund based on the volatility of gold. Dave thinks being invested in a specialized mutual fund defeats the purpose of being diversified in mutual funds.

ANSWER: Specialty funds that invest in one category of industry defeat the purpose of a mutual fund in the first place, in my mind. The purpose of a mutual fund is to be diversified. If I buy a healthcare fund or a gold company fund or a utility fund, I might as well have just invested in utilities, because I’m stuck in that one industry, and as goes healthcare, so goes my healthcare fund. I’d rather be in a fund that has some healthcare, oil, carmakers and tech. It’s got a little bit of everything in the economy in it. Not as much because I’m mad at gold and I think gold sucks, but just the idea of being diversified and having a little broader stance in your investment portfolio. I don’t buy specialty funds. If I were in your shoes, I’d probably move out of it on that basis.