Glossary
Mutual Fund
A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. It's managed by a professional fund manager who makes buy/sell decisions.
Why it matters
Mutual funds democratized investing by making diversification accessible with small amounts of money. However, the rise of index funds has exposed the high fees many actively managed mutual funds charge. The key question isn't whether to use mutual funds, but whether to use actively managed ones (high fees, usually underperform) or index mutual funds (low fees, market returns).
Example
A mutual fund with a $1,000 minimum investment and 0.85% expense ratio gives you instant diversification across 200+ stocks, but charges $85/year per $10,000 invested.
How Ray helps
Ray identifies mutual funds in your investment accounts and can compare their performance and fees. Ask to evaluate whether you're getting value for the fees.
$ ray "what mutual funds do I own and what are their expense ratios?"Related terms
Index Fund
An index fund is a type of mutual fund or ETF designed to track the performance of a specific market index, like the S&P 500.
Expense Ratio
An expense ratio is the annual fee a fund charges its shareholders, expressed as a percentage of assets.
Diversification
Diversification means spreading investments across different asset classes, sectors, and geographies to reduce the impact of any single investment's poor performance on your overall portfolio..
Asset Allocation
Asset allocation is how you divide your investment portfolio among different asset classes — stocks, bonds, real estate, and cash.
Portfolio
A portfolio is the complete collection of your financial investments — stocks, bonds, mutual funds, ETFs, real estate, and other assets.