What’s a Mutual Fund?


Ready to invest and not sure where? 

Grandpa told you at a young age to save and invest but you dismissed it as crazy talk? 

Now what grandpa was telling you has come full circle and you need a place to start. 

What is a mutual fund? Why may it be a good place for you to start saving and investing. 

A mutual fund is a tool that allows for you to invest your money with other investors to purchase a portfolio of investments. This may include stocks, bonds, commodities and real estate. Each shareholder will participate proportionately to the gain or loss that the fund has from the investments held inside of the mutual fund. 

As an example: An individual wants to start saving $100 a month it is hard to create a diversified portfolio of lets say stocks. A mutual fund will allow for that individual to invest their $100 a month and acquire shares of the mutual fund. The mutual fund invests in a diversified portfolio of stocks. The $100 a month that they are saving each month will not give them the ability to buy individual shares. For example: Apple, Chevron, Home Depot and Disney since the four of them may be worth more than $100, but inside of the mutual fund they are buying that owns those four names they are in a sense owners of those companies. Just not directly. 

Another advantage of a mutual fund it will provide an investor with professional management of their money. The fund managers that are running the mutual fund do the analyzing of the investments. Buying and selling the ones they feel are suitable for the portfolio based off of market conditions. For those that do not have the time or the expertise to oversee their investments these services may prove to be invaluable. 

All of this information sounds great!

Someone does the heavy lifting for us with our investments. But as the saying goes, there is no such thing as a free lunch. Watch what share class you are entering. If you are looking long term (7 years plus) an A share may be the most suitable for you. An A share has lower internal expenses for an up front sales charge. If you are investing $100 a month, $95 goes to work for you because of the upfront sales charge. If you are looking to invest for the short term (7 years or less) then a C share will be suitable.  Dollar for dollar your contribution gets invested but there is a higher internal operating expense that come with a C share. Mutual funds realize that the money is not viewed as a long term investment and as a result they will charge more to manage your money. 

Please do not hesitate to use us as a resource. Call us at 633-1515 to set up a complementary consultation. We want our money to go for work for us, make sure it is going to work for you!   Thank you for stopping by today

Nikki Boxler