What's the minimum to invest in a mutual fund?

Varies. Some have $0 (Fidelity Zero funds); others $1,000–$3,000. Employer 401(k)s often have no minimum since it's payroll deduction.

Are mutual funds good for retirement?

Yes. Many 401(k) plans offer mutual funds. In an IRA, you can choose mutual funds or ETFs. Low-cost index mutual funds are excellent for long-term retirement savings.

What's the difference between active and index mutual funds?

Active funds have managers picking stocks; index funds track a benchmark. Index funds typically have lower fees and often outperform active funds over time.

What is a Mutual Fund? How They Work | Investors Lab

What Is a Mutual Fund?

A mutual fund pools money from many investors to buy a diversified portfolio of stocks, bonds, or other assets. You buy shares; the fund's value (NAV) is calculated at the end of each trading day.

How They Work

NAV (Net Asset Value): Total value of fund holdings ÷ number of shares. Calculated daily.
Trading: You buy or sell at the end-of-day NAV. Orders placed during the day execute at that day's closing price.
Professional management: Active funds have managers picking investments; index funds track an index automatically.

Types of Mutual Funds

Stock funds: Equity focus
Bond funds: Fixed income
Index funds: Track S&P 500, total market, etc.
Target-date funds: Automatically adjust allocation as you approach retirement

Fees to Watch

Expense ratio: Annual cost as % of assets. Look for under 0.5% (lower is better).
Loads: Sales charges. Avoid front-end or back-end loads when possible.
12b-1 fees: Marketing costs. Prefer funds without them.

Mutual Fund vs. ETF

Mutual funds trade once per day; ETFs trade intraday. Mutual funds often have minimums; ETFs need 1 share. In 401(k)s, you'll usually see mutual funds.