The Basics of Mutual Funds
Professionals manage these funds by deciding what to buy or sell within the fund. Their job is to increase the fund’s value, and when the holdings appreciate in price, their fund’s share price also appreciates, to the benefit of you and other fund investors.3
What to look for in mutual funds
Investment objective:
Portfolio composition:
Risk level:
Performance history:
Fees (Main Categories):
Front-end sales load: The investor pays when they purchase fund shares.4
Back-end, or deferred, sales load: The investor pays when they redeem their shares.4
Different types of mutual funds
Cash
Bond
Stock
Target-date
Index
Taxation Concerns
Where to start
Once you have a clear picture of what you want, 3Nickels will recommend a mix of funds in distinct categories, chosen to match an appropriate level of riskiness for their goals.
When you are ready to take your research to the next step, the Investment module on the 3Nickels app will let you look at different investment account options that may work for you.
Resources
2 “Diversified vs. Non-Diversified Investment Company.” Small Business – Chron.Com, Chron.com, 4 Mar. 2021, smallbusiness.chron.com/diversified-vs-nondiversified-investment-company-37629.html.
3 A Guide for Investors – Sec.Gov, www.sec.gov/investor/pubs/sec-guide-to-mutual-funds.pdf. Accessed 15 Dec. 2023.
4 “Mutual Fund Fees and Expenses.” Mutual Fund Fees and Expenses | Investor.Gov, www.investor.gov/introduction-investing/investing-basics/glossary/mutual-fund-fees-and-expenses. Accessed 15 Dec. 2023.
5 “A Guide to Money Market Funds.” Brex, www.brex.com/resources/what-is-money-market-fund#. Accessed 15 Dec. 2023.
6 Voigt, Kevin. “4 Types of Mutual Funds.” NerdWallet, www.nerdwallet.com/article/investing/types-of-mutual-funds. Accessed 15 Dec. 2023.
7 “What Are Equity or Stock Funds?” Vanguard, investor.vanguard.com/investor-resources-education/understanding-investment-types/what-are-equity-stock-funds. Accessed 15 Dec. 2023.
8 What Is a Target-Date Fund (TDF)?, 29 Nov. 2022, www.fidelity.com/learning-center/personal-finance/what-is-a-target-date-fund.
9 “What Is an Index Fund?” Vanguard, investor.vanguard.com/investor-resources-education/understanding-investment-types/what-is-an-index-fund. Accessed 15 Dec. 2023.
10 “Mutual Funds and Taxes.” Fidelity, www.fidelity.com/tax-information/tax-topics/mutual-funds. Accessed 15 Dec. 2023.