Financial Terms Everyone Should Know – Funds

A mutual fund is a great investment vehicle. It pools money from many investors and buys a wide range of stocks, bonds, and other investment vehicles to meet the stated objective of the fund.   A mutual fund allows an investor access to a broad range of investments, and can have less risk than investing in a single stock or bond. Mutual funds can be actively managed, where the management buys and sells to maximize returns based on the fund’s objectives.

There are several types of mutual funds:

• Target-Date Funds – You will pick a future year (2040, 2045, 2050, for example) and they start out aggressively, but then get more conservative as the date becomes closer.
• Stock Funds – These are mutual funds that are mostly in equity or stocks.
• Bond Funds – These are mutual funds that are geared towards the investments that has a set rate of return, like corporate or government bonds.
• Index Funds – These are a type of mutual fund that attempts to mirror a particular index such as the S & P 500. This is more passive strategy as they require less research from your advisors.
• There are many more types of mutual funds to look into if this is a route you would like to take, so make sure to find which one(s) will work best for your financial goals.

The value of a mutual fund share, Net Asset Value, is the total assets owned in the fund divided by the number of shares and can be traded only at the value as of the end of the day.

Exchange Traded Funds (ETF) are a pooled basket of investments similar to a mutual fund. However, the shares are bought and sold more like individual stocks and can fluctuate in value all throughout the trading day.

Find Out More with MyMilitarySavings.com and Finances!