One specific piece of mutual fund advice occasionally heard from personal financial managers is to avoid penny stocks. These tend to be small cap companies that were delisted from major exchanges for a host of undesirable reasons, and their shares, which trade from under $5 to fractions of a penny on the so-called bulletin board exchanges, tend to be illiquid.

This can present a large problem for an investor who can buy literally millions of shares for a few thousand dollars, who is suddenly unable to liquidate the position. Most or all of one's money can be lost on such an exchange due to a low number of participants or illiquid conditions.

Bond investing is a staple of the diversified portfolio, and as with other investment vehicles sought by mutual fund money managers, there are a lot of choices. There are low yield bonds, often issued by government entities, that offer steady returns for little risk. There are higher risk, and thus higher yield "junk bonds" issued by struggling companies or financially uncertain institutions. All of these are available in the long and short term and are priced according to the mechanics of the debt market.