To achieve higher returns, however, you must be willing to live with some risk and be prepared to stay put. Most financial experts stress that in order to minimize risk, you should hold a well-balanced investment portfolio. On top of that, bond markets may have performed well, decreasing your loss further. To a large extent, by investing through mutual funds, we relieve ourselves of the time-consuming and almost impossible task of researching each investment opportunity and its possible risk. Instead, we rely on the knowledge and expertise of a fund manager, or a team of professionals, to buy and sell the best investments at the right time.
Some mutual funds have excellent track records.
Some do not. Doing your homework before you invest will reduce the risk of investing in the latter. Chapter 18 shows you how. There is a lot of talk about a fund's volatility. Volatility is a measure of the historical variability in a fund's rate of return compared with similar funds.