The best way to invest money
It's easy to look at the past couple of decades and kick yourself in the buttocks for all the investment paths not taken. What if, for instance, you had just put some money into a little stock called Amazon.com back in the late '90s?
Fantasies of big payoffs often don't consider the downside: Most big bets don't pan out. The stock market graveyard is littered with thousands of defunct companies that took the hopes and dreams of investors, along with their money, down with them.
"When you go into a very narrow strategy, you either win big or lose big," says CFP professional Michael Silver, partner at Baron Silver Stevens Financial Advisors in Boca Raton, Florida.
Diversification across investments lowers the risk of a big loss, but it also mitigates the likelihood of a home run. That's why most small investors are better served by investing in mutual funds or ETFs. Yet, funds that specialize in industries or sectors can still have an extremely narrow focus.
What's the best way to invest money? Famous fund manager Peter Lynch once advocated for investing in what you know. So what if, 10 years ago, you took that advice and put a $100,000 windfall into a sector that you felt passionate about?
What follows is an analysis of how particular sector funds performed over the past decade, based on performance numbers provided by Morningstar. With the benefit of hindsight, we chose the best performing funds in the gold, real estate and technology sectors. We also looked at the top performing socially responsible fund, as well as a portfolio of index funds. Finally, we checked out what would have happened to $100,000 if it were invested in something safe, such as a certificate of deposit. Read on to see what we discovered.