Does a mutual fund investor need two families?

June 20, 2008

I've invested in three Vanguard mutual funds and see several more that I like, but should I put some cash in funds from another fund family to make sure I'm diversified enough?

I've invested in three Vanguard mutual funds and see several more that I like, but should I put some cash in funds from another fund family to make sure I'm diversified enough?

That's not necessary since you can spread your bets well enough with just a handful of funds. Half a dozen well-chosen ones representing different broad market sectors can cover plenty of ground. A good basic mix might include funds that invest in small-cap domestic equities, large-cap domestic equities, developed-market international equities, emerging-market international equities, domestic bonds, and international bonds. You should be able to find six solid ones at Vanguard or any other large mutual fund family. Just make sure you don't let the all-in-the-family convenience trap you into settling for poor performers instead of venturing away from home.