How can mutual funds be just as risky as stocks?
While mutual funds offer more diversification than owning one or a few stocks, they may not offer diversification from risk. For example, if your mutual funds are all concentrated in equity mutual funds focused on investing in technology stocks, you may achieve some diversification among technology stocks, but if the tech sector declines, your portfolio will not be protected by diversification. In other words, your account could be concentrated, but still be invested in mutual funds. Have your broker explain to you what percentage of your assets is invested in each asset class and whether such allocation is appropriate for your investment objectives and risk tolerances. If your account is concentrated, or not properly allocated, and you suffered losses in these concentrated assets, you may be due a recovery.