The Pros and Cons of High Risk Mutual Funds

1. The Pros and Cons of High Risk Mutual Funds High Risk Mutual Funds High risk mutual funds hold the advantage of bringing in more money for your investment than most funds are capable of, but as the name says, they carry with them an incredible amount of risk. Depending on what's happening in a certain fund, as well as current events, you could lose money in any number of areas of your investment. Funds featuring only stocks are more risky than those that combine stocks and bonds, and even then there are various levels of risk depending on the category of the holdings. The following will give an overview of some of the different kinds of high risk mutual funds. Sector Fund Mutual Funds Sector funds that focus on corners of the industry like energy, health care, and real estate, only invest in companies that actually do business in that sector. For instance, an energy fund will not have stock from companies that make their business from anything other than coal, natural gas, and oil, whether it is the act of harvesting and distributing, or a different angle. Health care funds will center around the stocks of businesses supplying health care, medical supplies, and pharmaceuticals. Sector funds are known for sudden growth spurts that yield great returns for investors, but during times when the industry is down; their lack of diversity can be cause for losses just as big. Global and Micro-Cap Funds

2. Investing in funds from other countries, such as China, Brazil, or India, involves more risk than if you were to stick to shares in the US or Europe. International stock funds, and even those centered around small American companies, will more than likely not remain stable in the face of a troubled economy. However, when these investments see growth spurts, they will be extremely profitable. Micro-cap funds are a third brand of high risk mutual funds. These investments refer to stock held in companies with a value of less than $300 million. As was said before, the smaller the company, the larger the risk. On top of that, the more trouble the market is seeing, the more the risk increases. The Appeal of High Risk Funds Funds that are actively managed can be a risk as well. Frequent management typically means that a manager as a specific strategy that they follow closely based on market research. As a result, they trade frequently, meaning more fees and expenses for investors. In spite of the dangers involved in high risk investments, there is still a lot to be gained from being a part of one during a period of fast growth. Paradigm Capital Management is a trusted leader in small cap investing. The Paradigm Funds family of no-load mutual funds makes the firm’s small-cap and SMid-cap strategies available to fee-based financial advisors and retirement professionals. Paradigm Funds are widely available on more than 50 no-load platforms. To learn more about how Paradigm Capital Management’s capabilities align with your long-term goals, please contact us at (518) 431-3500 For more info, please visit here: http://paradigmcapital.com/