What Are Mutual Funds?

For actively managed funds, typical fees range from 0.5% to 1%. For passively-managed funds, 0.2% is more typical.

VTSAX, the largest mutual fund in the world, has a 0.04% fee.

There is no threshold where fees become “too high.” Of course, the lower the fees, the better.

That said, some investors prefer to stay under 0.5%. If your fees are higher, you may want to check fund performance.

Numerous studies have shown that even most professional fund managers fail to beat the market.

If the mutual funds you are considering are a part of your employer-sponsored retirement plan, you may have little control over them. However, you may be able to talk to benefits office if your retirement plan invests in high-fee funds that don’t have the performance to justify them.

If all else fails, you can always invest more in an IRA or brokerage account. Just be sure you are getting your full match if one is offered.

Final Thoughts

There are many types of mutual funds, such as stock funds, bond funds, and money market funds. And you can hold them in your 401k, IRA, or a brokerage account.

All mutual funds have some level of risk. Generally, the higher the risk, the higher the return. And the reverse is also true.

Mutual funds allow you to pool your money with other investors, allowing you to easily invest in companies with higher share prices. Plus, mutual funds tend to be diverse and often have low levels of risk.

However, there is still some risk, and you don’t have control over the investments.

Be mindful of your fees, and try to keep them as low as possible. High fees can eat away at your returns.

Above all, don’t wait to start investing. If you need a good way to start a brokerage account or IRA, give M1 Finance a try.

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Disclaimer: Before you throw out all other financial advice you’ve been given and dedicate your life to following my advice, please be aware that I am not a financial expert. I have never ...

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