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3.6 Managed Funds
- Start saving
- Power of Compounding Interest
- Reduce the amount of high interest debts
A managed fund pools money together from thousands of small-time
investors and then its manager buys stocks, bonds, or other
securities with it. When you contribute money to a fund, you get a
stake in all its investments. That's a big deal: Since most funds
allow you to begin investing with as little as a couple thousand
dollars, you can attain a diversified portfolio for much less than
you could buying individual stocks and bonds. Plus, you don't have to
worry about keeping track of dozens of holdings - that's the fund
manager's job.
The price for a share of a fund, e.g. ASB Unit Trust, is
determined by the net asset value, or NAV, which is the total value
of the securities the fund owns divided by the number of shares
outstanding. If a mutual fund has a portfolio of stocks and bonds
worth $10 million and there are a million shares, the NAV would be
$10. A fund's NAV changes every day, depending on the price
fluctuations of the fund's holdings.
The NAV is the price at which you can buy and sell shares, as long
as you don't have to pay a sales commission, or "load." You have to
pay loads when you buy from a broker, financial planner, insurance
agent, or other adviser.
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Financial Choices
Saving
Financial goals