20. Mutual Funds 1: What is a Mutual Fund?

That is right - that is certainly one reason - i.e. an S&P 500 mutual fund will own 500 or so stocks which with an investment of $1,000 say would not be purchasable. Another reason is that pooling the money spreads the cost of having and running the fund. It is possible to have your money in a distinct or segregated account (when it is a larger sum therefore typically) and that is what private banking is in part all about in part. Very best regards - Michael.

nevermind... I think I get it... Like if I wanted to invest 500 dollars in a mutal fund and one of the stocks in that fund was google, I would only be able to get 1 share of google for my 500 dollars, so a mutual fund allows me to get all of the stocks in that fund with only five hundred bucks. right?

why does the fund have to be put into a pool with other inverstors? why can't my fund manager or broker just pick some good stocks and keep my account seperate from others? or maybe it's irrelevant? it seems weird that it goes into a pool. does it cut back on commissions for the investor?

Anyone that buys a mutual fund contributes money to a pool of money that is then managed by the portfolio manager (PM) - or in the case of an index fund, is automatically invested in the index. The pool of assets are what the PM then buys or the index constituents in the case of an index fund. In the case of an S&P mutual fund, this would be the socks in the S&P 500 to a large extent for example. Hope it helps - best regards.

IRA stands for Individual Retirement Account. its probably only tax free in like 30 40 years.

what is the pool of assets exactly?

a) The book 'Saving and Investing' that I wrote; b) from the mutual fund company as well as from companies like Lipper and Morningstar - bear in mind that all funds tend to perform like the corresponding index so that often more a reflection of index than mutual fund skill; c) Many Mutual funds over long term have offered good returns as stock market indices have risen - the question in developed markets is more whether it is not better to have an index (mutual) fund (that is passively managed).

Thank you this is fantastic you should make a living off of this!(explaing these things i mean)

Hey, I'm in a band and I want to manage the money we make in the smartest way. What kind of account should I keep it in. I want it to grow interest but still be able to withdraw for things we need. Roth IRA is tax free, I know, but would that work for a band? Thanks!

Please go to site shown on channel - savingandinvesting com and then click on forum.

Hey michael, okay ill try and put a similar thread at your forum, let me know the address

Thank you very much for the comment - this is a longer answer as you can imagine and there are entire books written on this. A good amount of this is covered in my book. The other thing I was going to suggest - do you want to start a thread on the saving and investing forum and I can write more there. Best Regards, Michael

Ive been watching your videos, great explanation, can you tell me the way of choosing a stock, i mean there are so many ratios that just goes over my head?

thanks bro

Fantasic explanation. Well done