Many investors who own shares of good mutual funds don't necessarily own good mutual fund portfolios.
They may relish the challenge of ferreting out top-performing stock funds, bond funds that excel at balancing risk and return, and money market funds that consistently rack up safe, high yields.But the individual pieces they collect, in the haphazard way that is typical of people with busy lives, may not fit together well at all.
Even if the assembled portfolio of funds jibes with some standard formula or published model portfolio, it may still be ill-suited to your individual situation in life and the goals you want to reach.
That, in summary, is the basis on which more and more advisers - financial planners, brokers, whatever name they go by - are selling their services these days.
Many activist investors make the job a do-it-yourself project, rather than paying for somebody else's advice. But the message is still there: Fund investments will most likely work best if they are part of some cohesive plan.
"Customer portfolios reflect the confusion," says William Shiebler, president of Putnam Management Co. in Boston, adviser to the the nation's seventh-largest fund family.
"The typical portfolio contains five or six funds from different companies, bought in different places on advice from different people, some of it good and some of it bad," Shiebler said at a recent conference sponsored by Morning-star Inc., the Chicago fund tracking firm.
"They may be good funds for retirement, but not for putting a kid through college in eight years. There is no coherent strategy."
The picture can be muddled further by the sheer variety of modern investing formats. Do your direct fund investments dovetail with those you have in an individual retirement account or an employer-sponsored 401 retirement savings plan, where your range of choices is likely to be different or restricted?
These issues are prompting changes in the way funds are organized, packaged and sold. Many people in the fund industry believe the need for integration of fund investments represents one of their biggest opportunities for further growth.
They are busy introducing new funds that allocate assets among different categories of investments, manage investments with specific target dates in mind, and otherwise try to simplify the process of overall money management.
Meanwhile, even as more and more individuals grow adept at picking individual funds, business booms for fee-based planners advising people on their overall portfolios and strategies.
A landmark development in fund distribution appears to have occurred with the recent announcement that brokers at Merrill Lynch & Co. will deal in no-load funds, as well as the load funds they have traditionally sold.
This represents a big step in a continuing trend at Merrill, the nation's biggest brokerage firm, toward paying its sales force on the basis of assets owned by clients rather than individual products sold to those clients.
Merrill is often a trailblazer - as, for instance, in developing its Cash Management Account in the late 1970s, which became the model for central asset management accounts throughout the investment business.
So other full-line brokerage firms may well follow Merrill into the no-load fund arena. There they would be competing with no-transaction-fee fund marketplaces now flourishing at discount brokerage firms like Charles Schwab & Co.
And traditional commission brokers at places like Merrill would start to look more and more like fee-based financial planners, many of whom now operate independently using discounters' fund markets or working directly with fund families.
There is an irony in all this drive to simplify. As Shiebler noted, "Mutual funds were supposed to save (individual investors) from the headaches of actively managing their portfolios. But the proliferation of new funds and other investment options has confused the issue all over again."