What the Heck Is a Mutual Fund?

Mutual funds are an important option in saving for retirement , and most people don't know what they are--even if they already use them! Let's start at the beginning.
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Two Cents was created by Katie Graham, Andrew Matthews, Philip Olson CFP® and Julia Lorenz-Olson and is brought to you by PBS Digital Studios. We love dropping some knowledge on all things personal finance and helping you make better money decisions.
Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson
Directors: Katie Graham & Andrew Matthews
Written by: Philip Olson, CFP® and Andrew Matthews
Produced by: Katie Graham & Amanda Fox
Images by: Shutterstock
Music by: APM
SOURCES:
www.investopedia.com/investin...
www.investopedia.com/articles...

[@dianesullivan5338]

I plan to use my ETFs to buy mutual funds and growth stocks for diversification instead of reinvesting in the same place. To each their own methods though. The good thing is that you’re investing in the first place and that’s what’s important. Salute for the content!

[@PennyBergeron-os4ch]

The current market might create short-term opportunities to maximize profit, but in order to execute such strategy , you must be a skilled practitioner

[@JosephineKenney]

A lot of folks downplay the role of asset managers until being burnt by their own emotions. I remember 5 years back, after my lengthy divorce, I needed a good boost to help me stay afloat so I researched for licensed fiduciaries and came across someone who met my expectations. She's helped grow my reserve regardless of inflation, from $275k to $850k.

[@HildaBennet]

That does make a lot of sense, I'd love to sit back and have someone who has the Market figured out guide my decisions. Who is this consultant?

[@JosephineKenney]

‘Sonya Lee MItchell’ is the CFA I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.

[@HildaBennet]

I searched and found her page, emailed and made an appointment to talk with her. Hopefully, she gets back to me.

[@RangerRuby]

That intro was AWESOME! You guys make normally dull things interesting and funny! It makes people more interested in the world they live in! We need more awesome channels like this on KZbin! Great video and thanks for sharing!

[@TwoCentsPBS]

Thanks as always, Ruby! That was a fun intro to film - our directors Katie and Andrew asked me to ham it up as much as possible.

[@godloves7664]

Binary options has been the best trading and investment platform although I found it difficult at first till I met Mrs Laura Simon on telegram she changed my life I invested 1000$ with her and in the next 7 days (one week) I made up to $6500 Dm her on telegram if you want to be financially free.

[@godloves7664]

@@TwoCentsPBS Binary options has been the best trading and investment platform although I found it difficult at first till I met Mrs Laura Simon on telegram she changed my life I invested 1000$ with her and in the next 7 days (one week) I made up to $6500 Dm her on telegram if you want to be financially free.

[@Will-jg2zs]

I didn't know Ryan Gosling knew so much about investing.

[@CharlesPhan]

LOL

[@tshapedl]

Well he worked at deutsche bank and predicted the 2007 housing market crash with steve carell

[@vubaoanh1997]

well he made 40 mil in 2008 while working at Deutsche Bank, helped Steve Carell and his mates to made a lot of money :)

[@loangxuong9863]

@@vubaoanh1997 xin chào đồng hương. Not expecting to see any one here.

[@chrislancaster1982]

Looks absolutely nothing like him. Like not even a little bit.

[@sanderwrong9106]

Plz start a new channel for mustache care. Ty.

[@TwoCentsPBS]

BAHAHAHA! Don't tempt him. - Julia

[@jacobschweiger5897]

​@@TwoCentsPBS But I want to invest in a thick and distinguished mustache. Allthough if the markets go down it could be a HAIRY situation.

[@silentknight8732]

What kind of mustache is that

[@uriahleiataua2482]

I've learned more useful information by watching 3 of these video than I have learned in my entire high school education.

[@ClickLikeAndSubscribe]

Probably as much reflection on how high school preps kids for life..

[@Youmuus]

For beginners, i would go 95-97% funds / etfs and 3%-5% a stock you like. Gets you into the habit of researching stocks and looking at daily life and what companies impact you.

[@NaijaCINE]

I think some folks get into mutual funds for the very reason that they don't have to research stocks

[@tajwarhaque12345]

YOOO WHAT U DOING HERE MA MAN luv ur videos

[@fusedpanda7080]

I see ur comments literally everywhere... EVERYWHERE

[@stefanluginger3682]

But wait... 95% that would mean 500$ for a 10.000$ investment. 🤔 do you really think that makes sense?

[@tylerpeterson4726]

@@stefanluginger3682 You wouldn't want to invest all your money into one stock you think it going to go big because if it doesn't, you've lost a lot of money. But if there is one company you think has a high than average chance of beating the market, then buying a few shares outside of a mutual fund increases your exposure to that company's performance. If the company completely fails, then you lose $500. If it performs at the market average, it's performance is the same as if you had it all in an index fund. But if it out performs the market, then you stand to make a lot of money. It takes both hard work and luck to choose the next AAPL or TSLA, but some might think it's worth a shot.

[@divyanshmittal1998]

Love it , Make a series for stock market Please , Many people don't know about it and are too afraid to invest . How can one invest in them without paying any 3rd party company or financial advisors

[@TwoCentsPBS]

Thanks Divyansh! We have made an episode of the history and risks of the stock market. In case you missed it, you can see it here: kzbin.info/www/bejne/aGWceJZte6mKiKs - Philip

[@divyanshmittal1998]

Thank You

[@Iffy50]

This is a very basic video for the stock market.... ? If you want to invest on your own you can use things like E-Trade/Merril Edge/RobinHood. Be careful, all those places are taking a commission or they wouldn't be in business. Individual investors can make money buying and selling individual stocks, but your risk goes up too. If you are taking advice here, you should probably stick to mutual funds.

[@nunyabusiness896]

@@Iffy50 Agreed. If you need a 2 Cents video to explain how to invest in individual stocks, you probably shouldn't be investing in individual stocks. Individual stocks is basically gambling moreso than growing your wealth at a steady pace like a mutual fund. Might work out, might leave you broke. Better than a casino or the lottery, but still not a good idea for most people. IMO stick to mutual funds unless you are willing to risk losing 100% of what you put in.

[@justindie7543]

checkout robinhood, they have zero commissions.

[@meltingtomato]

Please please please talk about ETFs and the benefits and drawbacks vs Mutual Funds!

[@lukasbalaz9988]

Whats the difference between passive mutual fund and ETF, actually ? I thought they were the same but I really dont know :D

[@gargoyles9999]

Lukáš Baláž a passive mutual fund will be an index fund which simply owns a selected index (s&p 500 most commonly) these simply perform as well as the index or market does and comes with low fees. Actively managed funds are pulled out of Satans asshole since they charged 3, 4 or even higher percent a year in fees regardless if you made money, and the active manager will fail to beat the market 5 years in a row 96% of the time. ETF is and Exchange Traded Fund. Basically you can buy them on the stock exchange like any company but instead of owning Apple or Bank of America, the fund owns shares in multiple tech or financial companies. One I have right now is Harvest Healthcare (trading symbol HHL) which has its value evenly spread across the 20 largest pharmaceutical firms and pays a dividend every month. Getting a regular return in cash is how you succeed in investing, otherwise it's just hoping that you pick the right stocks and they keep going up which if firms with hundreds of Ivy League geniuses and super computers still fail at times, emulating that strategy is a losing game Personally for me i pick etf that own a broad swath pay at least 6% and trade in a narrow range. It doesn't bother me if my stock value is down $300 if I've already made 2k in dividends off of it. Not counting on the stock price going up to be your primary earner helps you ride out the tough times. I recovered completely from the 08 crash because I didn't panic and sell everything when it was down 40%.

[@angelopeiris]

Yes please do it

[@ohnoyo]

@@gargoyles9999 an intelligent comment from an intelligent man

[@Zoetherat]

The two are very similar. The differences between, say, the Vanguard S&P 500 mutual fund and the Vanguard S&P 500 etf are minor. One difference is the price. Mutual funds typically require a larger amount of money to buy into them. As of now (December 2020) you need at least $3,000 to buy into the Vanguard S&P mutual fund, but each Vanguard S&P 500 etf only costs $342. The other difference i know of is the way they're bought and sold. Mutual funds, like the video said, are like an investment soup that you're either pooling their money into or out of. Since the company is the one doing the actual buying and selling on your behalf, they typically do all their trades once a day. ETF, on the other hand, stands for "exchange traded fund", which means they're bought and sold between individuals on a stock exchange just like individual stocks are. Because of this, you can do trades any time the exchange is open. Also, the prices can fluctuate more. What if there's no one in the exchange that wants to buy now, but there will be in half an hour? Well, then the market price will drop now, but shoot back up half an hour from now. Those are the differences i know of.

[@Highlander741]

3:54 Using Mac OS with the Windows XP background? Please have my babies

[@TwoCentsPBS]

Haha, glad you caught that one :)

[@ClickLikeAndSubscribe]

Eagle eyes there!

[@WealthbuilderzTV]

I really love how you guys broke this down so clear. Broke down different types and such. This is the best I’ve seen so far. Thanks.

[@TwoCentsPBS]

Aww, thanks so much!

[@joojoo612]

It kills me that the channel "Two Cents" has three cents going into the piggy bank in the intro.

[@TheFattestLInHistory]

Lol

[@likeadino8580]

Well it wont kill you now they have a child 3 *cents baby*

[@tamerlane9889]

they have a kid so its three people

[@davidsaenz2449]

Honestly, this is such an important yet underrated channel! Another great and informative video. Thanks guys!

[@monstermushmush]

Your analogies are so amazing and creative! Perfect for people like me who need examples to understand something.

[@TheBemused]

That intro, though 😂. I love your videos! One thing I found interesting when first learning about mutual funds was the way they make money and how that money is distributed to investors. -Akeiva

[@TwoCentsPBS]

Thank so much Akeiva! It's really fascinating once you start to learn how mutual funds really work. This is just a very-basic introduction, but they're really pretty complex! - Philip

[@TheBemused]

Two Cents Yes, indeed!

[@godloves7664]

Binary options has been the best trading and investment platform although I found it difficult at first till I met Mrs Laura Simon on telegram she changed my life I invested 1000$ with her and in the next 7 days (one week) I made up to $6500 Dm her on telegram if you want to be financially free.

[@AlisonTarrayo]

Great information! Thank you.

[@enkiimuto1041]

This is probably the most complex yet practical question yet, can we have a series of it? Even if it is just one episode a month?

[@victorlevivalenciano1755]

Pro tip: just invest in an index fund, preferably one that imitates the s&p 500. It would outperform most mutual funds

[@ChrisInvests]

I think this is one of the best investments in the stock market

[@monstermushmush]

Thanks for simplifying everything. This is much better than trying to understand the Wikipedia information.

[@jaime9344]

Another great one! I laughed at 4:30 at Phillips facial gesture when Julia mentions Sushi restaurant. There is a story there.

[@kdash3215]

Can we just pause for a second and acknowledge the oddly satisfying sound the coins make while jumping into that piggy bank during the Two Cents title sequence?

[@budieful]

Wish you guys become my finance and economics Teachers 😋 great vid 🙏🏼

[@akarshadithya5479]

Can you cover index funds too?

[@TwoCentsPBS]

We briefly touched on it for this episode. But it's such a popular sub-set of mutual funds, we very likely may create an episode scrictly about Index Funds. Thanks for the request!

[@akarshadithya5479]

@@TwoCentsPBS thank you

[@davidcarson7855]

@@TwoCentsPBS index funds are a very good choice for most people because of the ultra low fees

[@waqipatel]

LOL I have an interview with Vanguard tomorrow and this really helped in my interview preparation. Thanks! keep up the work. Been subscribed for a while now!

[@winterdoud977]

This is the most helpful explanation I've found so far, and the words unicorn bladder are used.

[@justinmiller7398]

Loved the intro! Thank you for this. Index funds next (my personal opinion of course not a demand)!

[@ChrisInvests]

This channel is going to have so many subscribers!

[@bencorwin]

I think I’ll look back at these videos as the key source that saved my financial/retirement life.

[@perryd43]

Thank you for the post neighbors! Many blessings in return

[@Gold161803]

This channel is a godsend. Thanks so much!

[@lavaslice]

In my country (Chile) the retirement fund is a mutual fund by default (AFP), you can choose between A-B-C-D-E funds, that goes from risky to safer We are having a huge movement from the people that don't understand how it works and don't invest more than the default amount (10% of your salary) As a consecuense the people who didn't inverst more have very low retirement funds, it's a shame because people who invest a little more have a nice life after Great vid, would be nice of all the people in my country can educate them selfs about mutual funds

[@distortedsteeve2980]

This channel is such a blessing. I really like how you guys make sure we can understand what you're actually explaining. Not that it's hard, but the fact that it was never taught to us. Thank you so much for the knowledge and I hope this channel keeps growing!

[@YovanNoel]

Awesome channel. Thank you guys.

[@shah1668]

love how you presenting your videos. subscribed.

[@marcocorona3655]

This video is a great source of information for a beginner like myself, keep up the great work.

[@shekainatomlinson]

this is amazing! thank you, TC!

[@Twitter_Posts]

I really love this series!!

[@alejandrocano1994]

Thank you for explaining this

[@AutumnDay122]

I love your show! This topic is one of the biggest hurdles for me. If you don't mind me asking, which mutual fund company would be best to invest with, and what offers the lowest fees? Thanks so much!

[@nikhilbhosale3631]

Your videos are very helpful thanks for making it easier.

[@tonyissocool]

2:36 I like how everybody is picking what to buy and sell except for blue shirt in the middle lol

[@olandir]

Wow, this was really well explained. I feel like sometimes I "think" i know stuff but once I take the time to actually learn something about it I realize all the things I didn't learn. This video did that for me. I know mutual funds are how my 401k worked but I didn't really understand the ins and outs and how important they are. Also the robo-advisor thing is really cool. I didn't know you could set up a mutual fund to plan for a specific goal (like buying a house). I'd love to know more about where those are and how they work if you have a starting place.

[@danfg7215]

Looking forward to the blooper reel of takes where they messed up their outro

[@lampshade3795]

I wish I could like videos a lot more than just once! This one was awesome!!

[@corner559]

Great video! Please do a video on index funds and their benefits.

[@Luvbonne]

Appreciate this Entry level effort to inform the Public ... So Much to Grasp ... Before You even Get Your Toes in the Water ... Understanding the History of Mkts & Economics , not to Mention Wallstreet & the Modern Banking System is just Plain Survival ... Know What You Own ... Start from there ...

[@999bmxbandit]

I think it would be useful in effect to go over how much fees can cost you over time. There’s also plenty of 0 ER ETF’s that are offered now, most of which are index funds. I’d also appreciate a video going over how often index funds are actually beaten on the long term. Aside from some notable (and often times private) funds, very few funds beat the market over more than 5 years. Aside from that, it would be nice to see a video on REIT’s, especially with companies like Fundrise trying to sell low liquidity REIT’s to people who don’t know alternatives exist.

[@martinlavare1938]

Thank you so much for another thoughtful video that explains another financial concept that can baffle a lot of people.

[@JohnSmith-nc9ep]

This deserves a part 2 and maybe 3 as well.

[@sheepmellow]

The beginning of this was delightful and definitely caught my attention :D

[@inzys136]

I've been waiting for this a long time

[@TinkerWithUs]

mutual funds vs ETFs were one thing that took me some time figure out the difference, would make a good video. also, some comparison of self investing vs advisor vs robo-adviser would make a good video too (and not just fees, but also time, attention, etc)

[@miltonwilliams39]

Fantastic video thanks.

[@olenalazareva8604]

Thank you!

[@tintun-rf1lf]

amazing content two cents. wish I knew these things earlier. my friends like this channel as well. we wish u a million subs soon, from India ❤️

[@yunglambdiditagain4723]

Thanks for your two cents!

[@glennpayne9694]

i love the format of Two Cents!

[@blackbeltfinance4026]

Love the animations! That intro hooked me in for sure lol 😂

[@narasimha3679]

you're doing really a great job. we want more of these

[@TheAnilVEVO]

So much clearer than my professor! love

[@ashleytaylor994]

Best explanation ever!!

[@TheGbrie]

You two are the cutest couple! Thanks for all the good info and financial awareness you are sharing with the world :)

[@Eoverkill]

Could you do a episode on the difference between mutual funds, ETF's and index funds?

[@SunnySunflowers510]

Can you guys go deeper into and also explain index funds, please? Maybe in a video format as well. I heard that is the only thing I should invest in.

[@isodope7995]

Do like a guide for Teenagers to save and invest money,pls!!! 🙏

[@gs336]

Like the stock market ? Or other things such as bonds or property

[@brookekathryn1980]

OurrichJourney.com has all of that info for you! 👍

[@conqwiztadore2213]

Stop buying sneakers and bubble tea

[@emperorhirohito3965]

@@conqwiztadore2213 teenagers usually get parents money for clothes or birthdays to save money. I'd say personally since im still a teenager stop spending so much on food and set a goal for saving. I am currently working ealier than my peers at 15 I make only 200 a week so I got my self direct deposit and never looked at the account I still don't know how much is in it. ( btw a month I spend maybe around 50 on food which isn't bad but I want lower )

[@jacobschweiger5897]

the main difference is that you have no finacial freedom and cant actually invest without parental involvment. just keep phyical money under your matress until 18.

[@ClickLikeAndSubscribe]

Worth noting that the annual expense ratio fee is on the total amount of funds and not just earnings, in other words, even if the market is going down and mutual funds are loosing you still pay the fee on what you put in and the gains / losses.

[@davidshipman5964]

Thank you for providing such important information to such a huge demographic.

[@dustinbeach9910]

Well done, great video!

[@shaereub4450]

This year I opened an account with Betterment. They recommend a stock/bond ratio based on how far away your goals are. They recommend 85% bonds for a 5 year goal of mine, and 90% stocks for a Roth IRA. Going toward, after maxing out my Roth IRA, ill put my extra dollars in this bond account (like a sinking fund) as long as my (1 year of expenses) emergency fund stays in tact.

[@mrseaweed1000]

So simple but such a clear explanation. Thanks guys!

[@TwoCentsPBS]

You're so welcome. Thanks for watching!

[@umashankarmuralidharan6997]

This is why we love two cents😍😍😍😍..That intro....Wow|!!!😊

[@dianatamayo5089]

This is a great clip pbs stepping up

[@taaiee]

Hello, Just wondering these videos you are making if they are applicable elsewhere in the world or solely for American-market only? Even for Canada? love your videos!

[@supernnnnlive]

Thank you

[@gardreropa]

My experience: back in the 00's, when I was in my 30's, I started to invest into a "life-insurance combined with a mutual fund invest" as it was a prerequisite for obtaining a home loan. Instead of the minimum 50 EUR, I decided to put 100 EUR monthly into these funds... after some 13 years when I paid off my loan, I remained with some 8000EUR to my name... I was appalled to see that if I just had been putting that 100EUR monthly in a proverbial sock, I'd end up with some 9000 EUR... I still consider the mutual funds to be a big fraud... 2% commission is very steep when one runs the numbers, and this critical thought is what I missed in today's episode... This episode is the first significant letdown of the TwoCents for my part (of course this is just my personal opinion), but I still love you guys! Keep up the good work!

[@TwoCentsPBS]

I think the culprit is the "life insurance" part of your story. Hybrid products, like variable-life insurance (the product you're describing) tend to perform much much lower than a regular mutual fund. That's because of large commissions, high fees, and the fact that you're paying for life insurance out of your investment returns. It's not unusual for us to see a negative or 0% return on these products for 10 years or more. Don't confuse mutual funds with these life-insurance products -- they're not the same!

[@Camiloqz]

Great job guys!

[@tylerd7801]

You guys should do a comparison between mutual funds and ETF's

[@noorak6818]

Thanks for the video! Could you do the same for ETF’s? I can’t wrap my head around it and how it differs from mutual funds, for example.

[@franciscocamarena1205]

Thank you for this video! You guys are awesome :)

[@TwoCentsPBS]

Thank you so much Francisco!

[@sartajsingh6303]

Hii, I love to educate myself from 2 cents. I hope that you would cover mutual fund ratios, sip as a mode of investment vs lumpsum

[@pen2009]

Hello there, thanks for the video! Just a question. I'm based in Australia, are managed funds the same thing as a mutual fund?

[@brightfuture7079]

Amazing luv u guys, u 2 looking incredible amazing. Much love from UK

[@daisylogan3955]

I absolutely love this channel!! Keep the videos coming 😊

[@miguelgarcia-vg1fh]

Daisy Logan thank you!

[@ZhungyiChan]

What is the difference between mutual funds and a REIT? Could you pleas do a similar video for REIT and Index funds?

[@talknight2]

I have a college paper to write but here I am watching financial advice even though I've already got all my finances sorted :D

[@congnghe6010]

Great video as always. This information should be taught as early as high school. Keep up the good work!

[@jorgegodinezreyes]

This video is amazing thank you, I have a question, since I don't live in the US do you think it is possible to become an investor from overseas?

[@ryanfarhab1798]

This was a beautiful video! Thanks for making it so clear and understandable. How different can the fees be for active and passively monitored mutual funds?

[@Anneheed]

This was amazing. Simple and in a way I could understand! I'm in Australia, and I think we call Mutual funds, Managed funds. Is this right?

[@The_Bronze_Spoon_Investor]

I’m a young investor learning as much as I can right now about the stock market. Great video I really liked it! I believe in WORKING hard & PLAYING hard! I’m very interested in learning more wealth building strategy videos from your channel, any tips? My passive income portfolio is up 48% this year!!! I’m a hard blue-collar worker and have always paid for everything myself in life. Keep producing great content and I can’t wait to watch your next video. Good work!

[@TheLateral18]

thank you for videos like this one why is this info so hard to find !!!!! do you have to set a time to when you can withdraw the money or a mutual fund only can get collected after retirement again thank you for your videos!!!!! they are so helpful !!!!!!!!!!!!

[@TwoCentsPBS]

So glad you enjoy the series Angelo! Mutual funds can (generally) be sold whenever you want. If they are in a special retirement account (such as an IRA in the U.S.), they can have additional restrictions.

[@s.mcgavinz1491]

Don't take the fees lightly. Go index and go cheap.

[@s.mcgavinz1491]

Yes my friend, they are. But mutual funds are moved around more actively than index funds. Get a very low cost mutual fund that just sits there. Investing has never been about quick returns. It's the long game players that win. Stock picking is a myth. Over the long run the best pickers will be the worse and it'll balance out. Whatever you do just be knowledgeable of what you are doing. If you are not sure. Don't do it.

[@CreativeMonsterx]

"You need to diversify your bonds" - Wu-Tang Clan Financial

[@Wirely]

Thank you so much for another excellent video, particularly for your clear and concise explanation of a subject that often directly impacts individuals (especially in the case of 401(k)s), but is simultaneously lost is both good and bad hype. I really appreciate that you addressed both fees and management styles (and load and no-load), and particularly your nod to social issue funds.

[@akshaymadhu5586]

Love your channel

[@efr625]

Such amazing quality in the 2 Cents videos - both content and visual presentation. Thank you for sharing financial knowledge in such an enjoyable way!

[@feynstein1004]

"Mutual fund investments are subject to market risks. Please read the offer document carefully before investing."

[@bodhibriar9683]

Successful fund investment l have a wonderful from Austin very weekly.

[@JTStembler]

Stick with the low fee S&P 500 index fund.

[@ChrisInvests]

Purchased with Robinhood--lowest cost fund!!

[@user-xn4yu5rn9q]

Do this next - What the Hack is: Money

[@Manwalkerinpark]

Debt. It is Debt.

[@loringmanley8318]

Could you take a look at Real Estate Investment Trusts (REITs)?

[@grabakrfen9337]

love your videos