Financial Check-Up: Figuring Out Your Mutual Fund Portfolio

Surprised at how your mutual fund portfolio behaved in the last market swoon?

Want to do some practical return and risk planning for all your mutual funds together?

Here is an approach and a simple worksheet that will help you get a grip around all your funds as a portfolio. It will give you insights into your funds individually and force you to assess whether the funds you own make sense when they are taken together as a portfolio.

The Framework

The worksheet in Table 1 provides you with a framework to evaluate expected risk and return for individual funds and your portfolio of funds. There are some assumptions built into this approach that are important. First, the annual yield and annual capital gains percentages for the fund categories are long-term averages that can vary year-to-year but are historically reasonable. The longer your investment period, the more likely you are to experience similar returns.

Can your individual fund performances differ from these averages? Yes—and the differences can be significant. The more diversified your fund, however, the more likely that it will be similar to the average. However, the more funds trade securities, incurring transaction costs, and

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