7. What's a Mutual Fund?

Now that you are aware that cycles in the market will play havoc with your money, you are ready to select mutual funds with your eyes open. Instead of making foolish mistakes that will cripple your savings, you will be able to select certain mutual funds so that they insulate you from cycles, while giving you a chance to make money whenever and wherever conditions are bestowing wealth.

If you are like many people with a 401(k) plan, you can't tell one mutual fund from another. Don't feel badly about this. You are in good company.

A few years ago, two well-known professors, Shlomo Benartzi and Richard Thaler, set out to see how people picked mutual funds in their 401(k) plans. They gave a list of funds to employees at ...

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