By Andres Gutierrez
What is a mutual fund?
A mutual fund is simply an account that contains the investments of a group of people. For example, if Hiram invests $100, Kaila invests $50, Andres invests $50, and everybody else invests $100, all of us together have mutually invested in a fund. That’s why they call it a mutual fund.
There are usually billions of dollars involved in these funds, and a professional is hired to serve as administrator.
I recommend you invest in funds that have a history of at least 5 to 10 years of solid growth. Those are the accounts that garner the most reliable rate of return. Mutual funds offer no guarantee. But, long term, they have an incredible history of providing great results.
Mutual funds are in the 401(k) retirement plans that most employers offer. And they are a great way to save for our kids’ education and invest long-term. Based on the S&P Index’s growth, over any given 5-year period, the stock market has made money 97 percent of the time. Over any given 15-year period, the stock market has made money 100% of the time.
The difference between a mutual fund and regular stock is that the money in these funds is not invested in one company. It’s invested in anywhere from 90 to 200 companies, so if one company goes bankrupt, you don’t lose all your money. There might be one or two or 10 of these companies doing poorly, but 20 or 50 or 100 are doing very well.
Now, I can’t give you all the details in a short article, but I can tell you that this is how I invest. Many financial advisors recommend mutual funds, and it’s what I recommend to you.
If you’re already on this step in your financial plan, sit with a professional and have him explain everything without trying to sell you something. If it takes three to four appointments or three months of appointments with your financial advisor, that’s okay. Don’t go into this because it sounds good or because you like your advisor. Do it because you understand what you’re doing.
All this might sound complicated, but it really isn’t. Start reading about mutual funds or call my radio show with your questions. Remember, it’s extremely important to save and invest the right way, so you can eventually achieve financial peace.
Financial expert Andres Gutierrez is the host of “El Show de Andres Gutierrez” and creator of Paz Financiera. A successful entrepreneur and small-business owner, Andres Gutierrez knows what it’s like to start with nothing and build lasting wealth. In 2009, Andres joined Dave Ramsey’s team to bring the message of Financial Peace to the Hispanic community. For more information about Andrés Gutiérrez visit www.andresgutierrez.com. Follow him on Twitter at @elshowdeandres and on Facebook at https://www.facebook.com/elshowdeandres.