Many people who are approaching retirement age have questions as to what sort of investments they should be looking at, as they don't want to be caught out, for instance, by the stock market suddenly turning against them when they need the money to live on. A sound financial plan is something that everyone, of whatever age, should be looking at making just as soon as they have some assets.

If you are interested enough in your investments to be concerned about where to put them, but not so interested that you want to follow the stock market on a daily or weekly basis, then mutual funds can provide a good vehicle for your money. Mutual funds are available that include virtually anything that you would consider investing in on the markets, with the difference that you have, in effect, an investment advisor picking the individual stocks or bonds that you have in your portfolio. Portfolios of mutual funds can be held in a tax advantaged way, for instance in individual retirement accounts, or IRAs, and that allows returns to be compounded without paying tax on them until you withdraw the money.

Having said that, you should not expect to buy one or two mutual funds and sit back, taking no more interest in them. It doesn't work that way, as everyone is different, with different goals, personalities, risk tolerance, financial needs, and amount of money to invest. You need to do a little homework to explore which funds suit you best, and although any fund in itself will provide diversified investments between various stocks or bonds, generally mutual funds follow a particular theme, such as large cap companies, global funds, or different market sectors, so you need to consider buying several funds in order to diversify your portfolio in a safe way.

Morningstar.com looked at how many funds you need to hold in order to be diversified. They concluded that at least four would give a good result, but having more than seven did not make much difference to the overall volatility of your investment. Additionally, if you have too many you will be less inclined to check on them regularly, every three or six months, as you ought to in order to make any necessary adjustments.

To be clear, diversification is not a way to maximize your account, but a prudent way to get a good amount of income and capital gain in a more secure way. If you could always pick the right stock or fund, that would give you the maximum return. However, as you are unlikely to always select the best performing security, it is much safer to split your money between the different types and sectors of investment, so that if one area that is not doing so well, at least you hold funds in other areas that are working at the moment.

You can get an idea of the kinds of mutual funds that are available by looking at the mutual fund search tool at Integrated Asset Management www.iamllc.biz . Of course, you need to be sure that the funds you choose are spread out effectively over different types and asset classes, and that is why www.kenhimmler.com is a great resource for more investing education.

Authored by Kenneth Himmler, Sr.