Introduction to Mutual Funds
Do you want to learn about mutual funds? You've come to the right place!
This site is about retirement plans. And the fact of the matter is that most retirement plans (be they 401k's, IRA's, etc.)
use mutual funds as the primary investment tool. And what point is there to saving an investing for retirement if you don't
understand how the basis of your retirement account works? (Okay, there is still every reason to save in a retirement plan
even if you don't understand mutual funds! But you could be taking on more risk than is necessary or making other mistakes.)
As such, we feel it is of the utmost importance to devote an entire section of this website to educate you on mutual funds.
If you ever have a question about something we did not cover well enough or cover at all, please contact us. We'd be happy to
hear from you.
Ready? Good.
Definition: A mutual fund is a fund operated by an investment company who receives money from individual investors, then takes
the pooled assets and invests it in stocks, bonds, money market instruments, or other securities in the stock market based on
the predetermined investment objective of the fund.
In other words, when you invest in a mutual fund you are sending your money to a professional fund manager. The fund manager
takes your money, plus the money from ALL the other investors in the fund (could be hundreds or thousands of other investors)
and will purchase stocks, bonds, or other investments (a.k.a underlying securities) on the open stock market on behalf of you
and every other investor in the fund. You then become a partial owner of the mutual fund itself.
Step 1 to Understanding Mutual Funds
Since the foundation of every mutual fund is based on its underlying securities, the first step about fully understanding
funds is by starting with those securities –- primarily stocks, bonds, and money market instruments.
More coming very soon! Stay tuned...
