Mutual Funds/Index Funds

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Question
Hello:

Is it a good idea to invest in both a S&P 500 index fund and a total equity market index fund?

I thank you for your reply.

Answer
Dear Kenneth:

Those two funds are very similar; you would be better off investing in a very different fund, to make your portfolio more diversified.

Those funds contain a blend of value and growth stocks, mostly large caps.

So, you might  look for funds that own small or mid-cap stocks--assuming you already have exposure to bonds. Or an international fund.

Dodge & Cox International is a fine fund, although it invests in large-cap stocks. Still. foreign stocks would be  good choice to diversify your portfolio.

Good luck!

WB  

Mutual Funds

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Warren Boroson

Expertise

Author of "Keys to Investing in Mutual Funds" (Barrons), "Ultimate Mutual Fund Guide" (Probus), "How to Pick Stocks Like Warren Buffett" (JKLasser), and "The Reverse Mortgage Advantage" (McGraw-Hill). Former financial columnist for Gannett News Service.

Experience

Author of 20 books; winner of 1996 Personal Finance award from Investment Company Institute and Washington University. Formerly on staffs of Money and Sylvia Porter's Magazine. Had a radio program (on WEVD) about mutual funds and a newsletter, FundDigest.

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