If you have the time and energy to do your own investing, avoid mutual funds. Most fund managers are paid for the amount of money in their fund, not for the quality of their returns. Having said that, if you can't devote the time to investigate your own stock purchases, look for funds whose managers are deeply invested in them. Also look at bond and alternative asset funds. The more markets you are invested in, the less risk you take in one market. Overseas funds (like Japanese markets, or general asian markets) and commodities are less correlated with US and European markets.
I also encourage you to speak to an investment professional. A little expert knowledge goes a long way in finance.
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