"Stocks, and REITs and Gold: Oh My!" There’s No Investment Like Mutual Funds

May 06, 2019

Investment fads are nothing new. When selecting strategies for their portfolios, investors are often tempted to seek out the latest and greatest investment opportunities. But long-term investors should be aware that letting short-term trends influence their investment approach may be counterproductive.

Any individual trying to outguess the market by constantly trading in and out of what’s hot is competing against the extraordinary collective wisdom of millions of buyers and sellers around the world. With the benefit of hindsight, it is easy to point out the fortune one could have amassed by making the right call on a specific industry, region, or individual security over a specific period.

Before we list the many reasons for our commitment to using mutual funds as our primary investment strategy for clients, we are going to delve into three investment strategies that many of our clients have expressed an interest in: Stocks, REITs, and Gold.


Non-Mutual Fund Investment Strategies:

STOCKS - A stock (also known as "shares" and "equity”) is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock owners have a higher claim to dividends over common stock owners.

REITs - Real estate investment trusts allow individual investors to buy shares in commercial real estate portfolios that receive income from a variety of properties, including apartment complexes, data centers, healthcare facilities, hotels, infrastructure (e.g., fiber cables, cell towers and energy pipelines), office buildings, retail centers, self-storage, timberland and warehouses.

A Non-Traded REIT is a form of real estate investment method that is designed to reduce or eliminate tax while providing returns on real estate. A non-traded REIT does not trade on a securities exchange and because of this, it is quite illiquid for long periods of time. Front-end fees can be as much as 15%, much higher than a traded REIT due to its limited secondary market.


GOLD - Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk, but do you want to buy gold when the value is at its highest? The gold market is subject to speculation and volatility just like any other market.


MUTUAL FUNDS - A mutual fund is an investment program funded by shareholders that trades in diversified holdings and is professionally managed. 

At Financial Plans & Strategies, we primarily invest in mutual funds with three well-established companies: American Funds, Dimensional Fund Advisors, and Vanguard.


Why Financial Plans & Strategies uses mutual funds as our main investment tool:

Risk diversification – This is one of the most important principals of investing. Mutual funds provide access to a diversified portfolio of stocks across different sectors of many companies, which in turn helps investors be less vulnerable to unsystematic risk. Hence, mutual fund risk is much lower than individual stock risk and allows investors to have a diversified portfolio without the difficulties of having to purchase and monitor dozens of assets themselves.

Investment expertise - Mutual funds are managed by professional fund managers who have years (often decades) of experience and expertise in picking the right stocks to try and achieve the most favorable risk-adjusted returns.

Variety of products - Apart from equity funds, there are also balanced funds, monthly income plans, income funds and liquid funds to suit different investment requirements.

Economies of scale in transaction costs - Since mutual funds buy and sell securities in large volumes, transaction costs on a per-unit basis are much lower than what retail investors may incur if they buy or sell shares through stock brokers.

Variety of modes of investments - Investors can opt for different investment modes like lump sum (one-time) systematic investment plans, systematic transfer plans (from other mutual fund schemes), and systematic withdrawal plans, and these plans can be changed at any time. 

Disciplined investing - Share prices are highly volatile and can induce the investor to buy or sell in short time periods due to fear or desire for higher short-term gains. Frequent trading often leads the investor to incur losses. Mutual funds encourage investors to invest over a longer time horizon, which is essential to creating wealth.


In Conclusion:

When confronted with choices about whether to add additional types of assets or strategies to a portfolio, it may be helpful to ask the following questions:

  1. What is this strategy claiming to provide that is not already in my portfolio?
  2. If it is not in my portfolio, can I reasonably expect that including it or focusing on it will increase expected returns, reduce expected volatility, or help me achieve my investment goal?
  3. Am I comfortable with the range of potential outcomes?

Working closely with Financial Plans & Strategies can help individual investors create a plan that fits their needs and risk tolerance. Our team can help improve investors’ chances of achieving their long-term financial goals by pursuing a globally diversified approach; managing expenses, turnover, and taxes; and staying disciplined through market volatility.



  1. https://www.investopedia.com/terms/r/reit.asp
  2. https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart