Mutual Funds | Dad, How Do I?

Dad, how do I?

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Transcript provided by YouTube. Slightly edited with AI.

Hey kids, so it’s Money Monday and today we’re gonna talk about mutual funds. They’re a great way to get a better return on your money than you would get in a savings account, right? It is good to have money in a savings account, but anything extra we want to put in a mutual fund.

So first, I have a dad joke for you: When ants go missing, who do they call? The Department of Finance, ah.

So mutual funds are not a guarantee, you know, but if you look at a 10-year track record, you can get a good idea of what you can expect. If you play it safe and stick with the guaranteed interest rate that you might find at a bank, you’re actually losing money because it isn’t even enough to keep up with inflation. So you have to take some risk with some of your money.

So what is a mutual fund? So a mutual fund basically is you invest and you pull your money in together, right? So you pull your money in, and then the funds go to a manager that actually manages the money and invests in various stocks because if you invested in a single stock, you’re putting all your money in one basket, right? So there’s a lot more risk, could be a great reward, also could be a great loss. A mutual fund, you’re kind of hedging against a big loss, but again, you’re not going to have as huge a gain, which is fine because you can still make a good gain with a mutual fund.

So what a mutual fund does again is you have a manager that buys different stocks and maybe bonds too, you can choose. And there’s myriad of mutual funds that you can choose from, but what I like to do is I like to look at a 10-year track record, and it’ll give you a rough idea of what the return is that you can expect. You don’t want to go with a one-hit wonder, “Oh, last year it made 72 percent.” Well, but what did it make the year before? It lost 10 percent or what have you. So if you look at a 10-year track record, it gives you a pretty good idea of what you can expect from that mutual fund.

Also, we want to, I don’t know if you’ve heard of loaded mutual funds and no-load mutual funds. I think years ago, loaded funds were much more popular because you’d pay an investor to invest for you, and then he’d buy a loaded fund, and then there’s a commission involved and all that. So I’d go with a no-load mutual fund, which there’s tons of them now.

And what that means is if it’s loaded, it means, let’s say you had $500 to invest and it had a load on it, you invest the $500, but then they take some of the money right off the top before it’s even invested. And you don’t have to do that with a no-load mutual fund. There are lots of good choices, and you can do it. So there are several good companies you can reach out to, and they’re very, very helpful. You can, they’ll walk you through stuff like Fidelity or Vanguard, to name a few. You know, there’s Acorns too. There are lots of different choices that you have, so you can do your own research. But I would encourage this, I’m trying to simplify this for you. You know, it’s a little more complicated, but basically that’s what it is. And if you have a 401(k), we’ll talk about 401(k)s or retirement, that’s basically what you have. You probably have six to eight options within your 401(k) to invest in different types of mutual funds. Some are very bond-heavy, lots of bonds, so the return’s not great. If you’re younger, you want to take a little more risk with your money so that it pays off. You don’t want to invest in bonds when you’re in your 20s, right? You want to take that risk so that it pays off. And then, you want, like we talked about the rule of 72, if you can get 9 percent and it doubles in eight years, then it doubles again, then it doubles again by the time you retire.

And you can get, you can get 8 to, I mean, even more than that. I don’t want to get your hopes up on this because there’s no guarantee with anything. I’m not a financial advisor, I’m just trying to give you Dad advice that I have given to my own kids. You just want to take a look at it and figure out what risk you can tolerate. But again, if you don’t take that risk, you’re actually losing money by putting all your money in a savings account. It is good to have money in a savings account so that, for in case of emergency, you just don’t want to keep piling up money in a savings account and then not take some of that money and invest it in something that can actually give you a better return. Mutual fund is just one of those. There’s ETFs, we’ll talk about that in a future video, but I just wanted, I thought I tried to explain this to you to hopefully give you a better idea of what you’re looking at when you’re looking at a mutual fund. It’s you taking your money, you’re putting it into a mutual fund with other people, and then that money is going to this manager who is managing that fund.

And there’s different managers, and there could be multiple managers within a fund too, right? It could be a group of people, and then they decide what is a good investment based on what you want to invest in too. So there’s different categories too that you can choose, different sectors that you can choose to invest your money in that you think is a good investment. Right, so one thing I did want to include in here is when you do a mutual fund, there are fees associated with this. It’s just a percentage that you pay to that manager in order to invest the money. So even though it’s a no-load, you’re not paying each time you make an investment or each time you pull out the money. That’s what a loaded fund would do to you. If you invest, you a lot of times you’ll pay on the front end, you’ll pay on the back end, and you can get no-load mutual funds without that are just as good, in my opinion, but you will just be aware. So when you’re doing your research on your mutual fund, you look at the 10-year track record, you also want to pay attention to how much fees are being charged too. And that’s the difference between a mutual fund and an ETF, which is an exchange-traded fund. Those you really don’t have any fees because they’re just doing it robotically where it’s investing. But I’ll talk about that in a future video anyway. Just wanted to make you understand that you do pay some sort of fee, even though it’s considered no-load. You’re just not paying per transaction. There is a small percentage, usually around 1 percent or less, or more, depending on the fund that you choose. So you always want to look at that as well.

So hopefully that helps you understand what a mutual fund is. I would highly

encourage you to just look up Google mutual fund and do your own research so you get a better idea of what a mutual fund is. Just to protect yourself, always do your own research. If I ever recommend anything, anybody recommends something, you always got to do your own research. It’s kind of lazy to just assume, “Oh, that guy, he’s telling me the truth.” Well, you always want to do your own research. Don’t be lazy in that respect, especially when it comes to your money. You want to make sure you’re doing it, you’re being smart with it, right?

So, all right, I hope that explains this to you. We’ll get into more money stuff, but it’s tough to know where to begin and what to give you. I’ve been trying to give you bite-sized chunks on some of my other channels because I want you to chew on it. And that’s why I wanted you to understand if you invest at 2 percent, it’s going to take you 36 years for your money to double, right? And that is painful. So we got to look at other options for you to be able to have your money working harder for you and smarter for you.

So, all right, I hope that was helpful for you. Thanks for watching, and God bless you.

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This post was previously published on YouTube.

Welcome to “Dad, how do I?” Here you will find “How To” videos by a dad who has raised 2 adults (and we still talk). I will do my best to provide useful , practical content to many basic tasks that everyone should know how to do. On this channel, you will find a variety of content like How To’s, Story times, Dad Chats, and more!

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