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Safe or aggressive goals may be best met without mutual funds

No matter how well-designed mutual funds may be for a wide range of investment missions, sometimes a fund just is not the best answer for your needs.

The prime virtue of mutual funds is the diversification they provide. That, along with other attributes such as liquidity and convenience for small investors, makes them great candidates for a variety of purposes ranging from growth investing to cash management.

But stock funds are less attractive for those who want concentration, not diversification, especially aggressive investors out for sky's-the-limit rewards. And bond funds are less attractive in situations in which diversification adds no real value, as for conservative investors whose prime concern is safety.

Let's suppose you are a young, ambitious sort with a taste for adventure and a few thousand dollars in the bank. A couple of friends you respect want you to come to work for their fledgling business venture and invite you to invest your modest nest egg for a nice equity interest in the company.

Instead of opening a mutual fund account at this early stage of your working life, you might choose to plow your money into your friends' start-up enterprise.

The risks are many times larger that way. The probability of taking a total loss is certainly much greater. But the potential for big-time rewards is also a lot better.

Now imagine yourself in an almost opposite position. You're well into your retirement years, so comfortably situated that your main concern is protecting your money from risks such as bond defaults and dividend cuts.

To live well and sleep soundly, you decide to put most of your money in U.S. government securities, spreading it over a range of maturities from three-month Treasury bills to long-term Treasury bonds. By laddering your investments this way, you minimize the chance that you'll ever need to cash in any security before maturity at a possibly depressed price.

You can set up such a portfolio using mutual funds that invest exclusively in Treasuries. But you can save the expenses and management fees by buying securities straight from the government through the Treasury Direct program.

You can buy Treasury bills of one year or less for a minimum of $10,000; notes with two- and three-year lives for $5,000; and longer-term notes and bonds in amounts of $1,000. Diversification by issuer isn't a matter of concern, as all Treasuries come from the same source, Uncle Sam. For information, call the Federal Reserve Bank at (904) 632-1179 or (904) 632-1190 between 9 a.m. and 2 p.m. weekdays.

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