What Not To Invest In

by Alan Lavine and Gail Liberman

We already have some 10,000 mutual funds. Every time we have a different economic event in the world, do we need another mutual fund to help us diversify our portfolios?

Heck no. The sad fact is that investment companies create new funds based on current economic conditions to boost the sales.

Here’s what one new fund company’s public relations department has to say about its new mutual fund.

“This is a unique, relatively new, no-load mutual fund that gives U.S. investors easy exposure to other hard currencies (and gold) as a way to protect against the declining U.S. dollar.  Even with the recent rally of the U.S. dollar, it is still down significantly from the euro, pound sterling and others overall and is on the decline again today. The fund has been steadily attracting investors looking to diversify into a basket of hard currencies.”

If you want to benefit from the change in the value of the U.S. dollar versus foreign currencies, you can invest in international stock and bond funds. Or you can invest in a global balanced fund that invests in stocks and bonds worldwide.

There are a lot of other low-cost well-managed mutual funds. These funds have long-term track records. So you can see how they perform in both up and down markets.

Check out Vanguard, T. Rowe Price and Fidelity Investments for full line of well-managed mutual funds.  

The bottom line: Foreign currency investing is high risk. You don’t need it. And this fund has no track record. So you can’t even determine if it would help the risk and return on your existing portfolio of mutual funds, stocks and bonds.

Alan Lavine and Gail Liberman are husband-wife personal finance columnists, journalists and authors. They are the authors of "Rags To Retirement," published by Alpha Books. Their columns appear in newspapers throughout New England and the Southeast, as well as online. Their commentary on mutual funds and personal finance is carried by 200 radio stations nationwide every Sunday over Business News Network's Charles DeRose Financial Advisor Show. Al and Gail’s new book is "Rags To Retirement:  Stories from people who retired well on much less than you think," published by Alpha Books.

More articles by Al and Gail can be found here.