In choosing among investment funds, a temperamental buyer might pay extra attention to the following points:

(1) Diversification. With broad diversification, a fund’s past performance is a better guide to the future; because the fund has always owned a good many stocks, a good performance record cannot be the result of a lucky choice of just a few stocks.

Some funds are several times as volatile as others. A “balanced” investment fund divides its assets among bonds or preferred stocks, or both, as well as common stocks. Also, the type of common stocks owned by a fund affects its volatility. So if a man gets panicky when the price of his stock drops, he had better look for a balanced fund whose record shows a comparatively stable price.


For skeptical investors who have trouble trusting an agent with their hard-earned money, investment funds are often the best bet.

Suppose a skeptical investor wants proof that an adviser obtains good net results for his clients. An adviser’s normal answer is that his reputation shows he is competent, that a client should select an adviser and then trust him, the same, as he would do with a physician or a surgeon.

A better solution for a cautious investor is to buy shares in one or more investment funds. To be sure, this requires some study, but the sensible selection of a investment fund is a simple matter compared to trying to choose among all the number and variety of corporate stock available. The job is further simplified if an investor can locate a dealer specializing in investment funds.

For a nervous skeptic, a major advantage of a investment fund is that it publishes tables showing exactly what net results have been obtained by people who bought its shares on certain dates in the past. Of course, the future is not guaranteed, but a fund’s past performance record furnishes a solid starting point.

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