Advocating for yourself is your biggest weapon in managing your money, especially in investing. You might be confused with the different types of funds, so in this episode, Jen and Jill discuss mutual funds for you to be able to advocate for yourself with little to no help from advisors or experts!
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What Are Mutual Funds?
This article by BankRate discusses mutual funds and other funds in detail.
What Jen + Jill have to say:
Mutual funds are an investment vehicle that allows individuals to invest their money along with other investors; it’s a mutually funded investment. Mutual funds then do invest in many different companies, and some even invest in the entire stock market. Jills loves this article because it helps make the different terms around investing, specifically mutual funds, graspable. Jen defines ‘securities’, which is a commonly used term around the topic of investing, as a fungible, negotiable financial instrument that holds some type of monetary value. Basically, a blanket term for anything that holds value (stocks, bonds).
Most mutual funds invest in a large number of securities, allowing investors to diversify their portfolios and reduce risk at a low cost. It’s worth noting that there are different types of funds, such as index funds, which not a lot of people realize. It’s also a type of mutual fund: equity funds, which are all kinds of different stocks for small and large companies (small-cap and large), growing companies (growth), and more. Also, there are plenty of pros and cons when considering investing in a mutual fund.
Mutual Funds: Different Types and How They Are Priced
This article by Investopedia differentiates the types of mutual funds and their pricing.
What Jen + Jill have to say:
The price of a mutual fund share is referred to as the net asset value (NAV) per share, but while every share of a mutual fund has a price, we don’t necessarily care about that as much as we care about the fees. Jill reminds us how helpful it is to understand that the value of a mutual fund will depend on the performance of the securities in which it invests.
There are two different ways to manage mutual funds and what they cost. Jen mentions index funds as passive, which can be defined as a strategy that requires less research from analysts and advisors. Fees are about.44%, but many are less than.1%. Fidelity even has zero-fee index funds. There are also actively managed funds, which often have fees such as management fees, ongoing fees for distributions, and Jen’s favorite fee, 12B-1.
What’s your “lesson learned the hard way” from your savings and investment journey?
Jill thought she was investing after opening an account and having set up automatic deposits; unknowingly, she wasn’t really investing anything at all! She also thought her Roth IRA was a shared retirement account with her husband. Good thing Jen was there to make her realize things, but even Jen is guilty of forgetting to invest money to put into a 401(K) rollover.
Bill of The Week
Thank you Megan for sharing your bill about investing in a comfy pair of shoes for your cleaning business!
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