Ep 26: Mutual Funds - What Are They and How Do They Work?
InvestingOn This Episode
Mutual funds have long been the most popular way for people to invest, but that landscape is changing. We’ll explain what mutual funds are and the different types.
Takeaways
On today’s Saving With Silverman podcast, Mark Silverman CFP® explains what mutual funds are and how different types work.
“I don't think mutual funds are a bad investment. They've been around a long time. This is primarily what we sold when I started this business out of college in the 90s,” said Mark.
Expense ratios in mutual funds are the expense of the fund. Some funds are more expensive than others. Typically, stock funds are more expensive to manage than bond funds, and international funds are more expensive to manage than domestic funds.
“If you’re paying 2% or 3% percent in expense ratio on a fund, that's quite expensive,” said Mark. “Most mutual funds should be around 1%. Ones that we use here in our firm are quite a bit less.”
There are also loaded mutual funds, including front load (pay a percentage up front), back load (you have a higher expense ratio), level load (1% up front and higher expense ratio) and no load. These were very popular in the 1980s and 1990s.
Remember that it’s not what you make – it’s what you make after fees and taxes.
Listen to the entire episode to hear more. Click on the timestamps below to skip to a particular segment.
If you’re paying 2% or 3% percent in expense ratio on a fund, that's quite expensive. Most mutual funds should be around 1%. Ones that we use here in our firm are quite a bit less.
- Mark Silverman, CFP®
The Layout
Let’s get rolling with the first episode and you can use the timestamps below to skip around to specific topics.
1:22 – Clients with mutual funds
2:06 – Expense ratios
3:20 – Loaded mutual funds
5:20 – Tax issues
6:23 – Should mutual funds be eliminated?
7:23 – How often does Mark use mutual funds?
Don't forget to subscribe to the show on your favorite app!