November 2021
Beginner
336 pages
7h 50m
English
book
The Bogleheads' Guide to Investing, 2nd Edition
by Mel Lindauer, Taylor Larimore, Michael LeBoeuf, John C. Bogle
Content preview from The Bogleheads' Guide to Investing, 2nd Edition
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Chapter Four Know What You’re Buying: Part Two: Mutual Funds, Funds of Funds, Annuities, and ETFs
I’ve found that when the market’s going down and you buy funds wisely, at some point in the future you will be happy. You won’t get there by reading, “Now is the time to buy.”
—Peter Lynch
MUTUAL FUNDS
Mutual funds pool money from lots of investors to buy securities. Those securities can be stocks, bonds, or money market instruments, as well as other types of investments. As an investor in a mutual fund, you actually own a small fractional interest in the underlying pool of securities purchased by the managers of your mutual fund.
Mutual funds are governed by the Investment Company Act of 1940, and in most cases by the states where they do business.
Mutual funds are available in many varieties. There are equity mutual funds that invest in stocks, bond funds that invest in (you guessed it!) bonds, and funds that invest in a combination of both stocks and bonds (hybrid or balanced funds). There are also money market funds, whose goal is to offer a stable $1 per share value.
Within each type of mutual fund (equity fund, bond fund), there are a number of funds with differing investment objectives. For instance, equity mutual funds include these funds:
- Aggressive growth funds
- Growth funds
- Growth and income funds
- International funds
- Sector and specialty funds (such as REITs [Real Estate Investment Trusts] and health care)
Just as with equity mutual funds, bond fund investors have ...
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