Mutual Fund Fees Cover Administrative Costs. Mutual funds can offer streamlined investing but they’re not free. There are certain fees you have to be aware of when investing in mutual funds.
While it can be confusing, the answers to the following three questions will help you navigate the mutual fund waters—from how they work to how to add them to your investment portfolio. What Is a Mutual Fund? For all intents and purposes, mutual funds serve as an alternative for investors who can’t afford an individually managed account. Mutual funds are formed when investors with smaller amounts of capital, pool their money together and then hire a portfolio manager to run the consolidated pool’s portfolio—subsequently buying different stocks, bonds, or other securities in a manner consistent with the fund’s prospectus. Each investor then receives their respective piece of the pie while sharing the expenses, which show up in something called the mutual fund expense ratio.
#vanguard s&p 500 index fund vs etf#vanguard s&p 500 index fund etf shares (usd) voo#stock funds#vanguard s&p 500 index fund admiral shares price#vanguard s&p 500 index fund ticker symbol#vanguard s and p 500 index fund#vanguard admiral shares s&p 500 index fund pick#stock price#vanguard s&p 500 index fund dividend#vanguard s&p 500 index fund morningstar rating#vanguard s&p 500 growth index fund etf shares#vanguard s&p 500 index fund or etf#money mutual#vanguard s&p 500 index fund dividend date#vanguard s&p 500 growth index fund etf#vanguard s and p 500 index fund admiral#vanguard s&p 500 index fund morningstar#vanguard s and p 500 index fund tickerrating
Knowing Your Risk Tolerance. Before choosing funds, it’s important to know your risk tolerance—a measure of the level of fluctuation (a.k.a. volatility—ups and downs) or market risk to which you’re willing to subject your portfolio. If you are just getting started investing with mutual funds, or if you get highly anxious when your $10,000 account value falls by 10 percent (to $9,000) in a one-year period, your risk tolerance is relatively low—high-risk investments probably aren’t for you. You might consider starting with a balanced or ”hybrid” fund.
Start your research with one of the best no-load mutual fund companies, such as Vanguard, Fidelity, and T. Rowe Price. No-load mutual funds don’t have sales charges, called loads, which can be as high as 5.75% of the purchase. Therefore, when buying no-load funds, you’re buying shares without paying loads. Also, these mutual fund companies offer many different mutual funds with low expenses, which are measured by an expense ratio. For example, many of Vanguard’s funds have expenses below 0.30%, which is $30 for every $10,000 invested, whereas average expenses for most mutual funds are above 1% or three times that of Vanguard’s.
Basic Types and Categories of Mutual Funds