Mutual funds are also here to stay. The mutual fund universe touts an estimated 85,000 or so available for sale to investors worldwide. They still constitute a large component of pension funds and investor portfolios of all sizes. In spite of negative press from time to time, purchasing a mutual fund may make more sense than any other type of investment.

Why is that? Sheer diversification of investment vehicles, for one. Why would anyone not consider buying an A&P 500 index or other index type fund, where for a very low cost of administration (and minimal entry fee) your portfolio is exposed to the 500 largest companies in the United States?

Mutual funds are pools of investor assets, heavily regulated in almost all jurisdictions by Securities Regulators. They are liquid, generally utilising frequent trading patterns. They attract excellent managers; their commission fees are capped to reasonable limits; they are quite transparent being monitored by a governing Board of Directors, an investment policy guideline, and subject to annual auditing requirements with oodles of disclosures.

Mutual funds are very different from their remote cousins, hedge funds.

Twenty or more years ago, the small investor could not afford to invest. That has all changed. With 85,000 choices, it can be particularly burdensome to make informed decisions. Well, really there are about 25 mega giant brand names that are more than enough for most of us to pick from.

How do you pick what you need? How do you, as the industry says, allocate your precious savings into the right investment accounts. It is not so easy as we all are tempted to chase the winners, moving assets back and forth as the markets change.

Remember the classic adage, "Past performance does not equal future results".

Statistically, chasing performance does not work. Investors have opted for funds such as a Lifestyle type asset allocation (because the portfolio manager does the performance work for them) and have seen more consistent long-term returns.

A new study. According to the John Hancock Website on August 10, 2006, US pension plan participants (401(k)) in John Hancock's Lifestyle Portfolios earned better returns on average than those who chose their own asset allocations.

The survey also showed that 93.5 percent of these Lifestyle Participants experienced results superior to the S&P 500 Index, an investment industry benchmark. Asset allocated portfolios are professionally managed portfolios of funds that reflect a particular investment objective and risk strategy.

Let the portfolio manager choose for you. According to the study, 88.7 percent of participants who chose their own asset allocations would have accumulated a higher ending balance if they had invested in a Lifestyle Portfolio that corresponded to their risk score.

6.02 versus 2.66 percent. On average, their average annual investment returns would have been 2.96 percentage points higher. Participants who had chosen to allocate all of their contributions to a single Lifestyle Portfolio had a return that was more than double the return earned by non-Lifestyle Participants: 6.02 versus 2.66.

This study reached its conclusions by comparing investment returns of over 162,000 John Hancock USA 401(k) plan participants.

This is a significant bit of investor information and I shall endeavour to learn more and report on it in the future.

Simply put, if you choose a fully asset allocated mutual fund based on your level of risk toward investments and capital market; you are getting the best of the mutual fund world.

These are available in the offshore world, too ? your pensions are more often than not in this structure. Your assets will be managed in a pool by global expertise, and you can get on with the job of bringing in more savings to finance your future. Think about it.

Next week, kinds of mutual funds, how asset allocation works and how to tolerate risk.

Martha Harris Myron CPA CFP? is a Senior Relationship Manager at Argus Financial Limited. She specialises in planning for lifestyle transitions and rewarding retirements for executives and senior career professionals. DirectLine: 294 5709 Confidential email can be directed to mmyron@argusfinancial.bm

This article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product.