Q Is there anything inherently risky about having all your mutual-fund investments with the same company? I have three funds with Vanguard and a fourth fund with another company. The fourth fund is not doing well and I want to move it to Vanguard. My son asked if a major loss to one fund in a fund group would affect other funds in the group.
F.A. via e-mail
A "Under the Investment Company Act of 1940, which governs mutual funds, each fund is a separate and distinct financial entity," says Lawrence Solomon, statistical editor for the No-Load Fund Investor, in Irvington-on-Hudson, N.Y. Therefore "each fund is protected against claims from creditors with other funds" in the same fund group.
Also, be sure that your funds don't have the same stocks. Such "fund overlap" gives you less diversification against market turbulence, says Mr. Solomon. Vanguard, he adds, is a "very fine company."
Q I just graduated from school and am beginning to earn a salary. I would like to save for a house, car, etc. Will you please recommend some basic reading that explains, for example, how the stock market works, what kinds of investments there are, what types of accounts banks offer, and how everything is taxed?
L.S., Rochester, N.Y.
A There are many fine starter books on finance, both on library shelves and at bookstores. Some of my favorites are "Personal Finance for Dummies" by Eric Tyson (IDG Books), "The Truth About Money" by Ric Edelman (Harper Business), and "The Only Investment Guide You'll Ever Need" by Andrew Tobias (Harcourt).
Q I am originally from Israel and have no family in the US to assist me on financial matters. I have $8,000 in a CD. That is my only savings. Could you suggest the best way to invest it so the interest will be credited to my trust-fund account so that I have some spending money?
A.R., Tennessee Colony, Texas
A According to a spokesperson for the American Bankers Association, "ask your financial institution to send you a check for interest earnings, rather than reinvesting them." Usually such checks are mailed quarterly.
CDs are considered "safe" investments. If you want higher returns, you should consider contacting a mutual-fund group, such as Fidelity, Vanguard, or T. Rowe Price.
Questions about finances? Write:
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