Mutual Funds

As we discussed in our Mutual Funds post, when you invest in a standard mutual fund, the stocks are diversified in a nice, safe manner. Hopefully, you can ride them out and gain lots of money along the way. Retirement will be sunny and warm, and your heartbeat won’t flutter out the window every time the market shifts.

We talked earlier this week about mutual funds. Historically mutual funds allowed us to pick a fund manager and have him manage our funds, as well as other investors', in a large pool. In recent years however, a different kind of mutual fund has become very popular, the index fund.

What is an Index Fund?

For many people a mutual fund presents one of the easiest ways to get involved in the stock market. Rather than buy specific stocks, mutual funds allow you to pool your money with a bunch of other investors and buy a collection of stocks together. This pooling of money also makes it possible for the group to hire a money manager to choose the stocks, which can yield better returns than if we were to all choose stocks on our own. So let's take a closer look at mutual funds and their advantages and disadvantages.