A mutual fund is a type of investment that pools money from many investors to buy a collection of stocks, bonds, or other asset classes. This article explains what mutual funds are and why they are a popular investment choice for your Gusto 401(k) or IRA.
Without mutual funds, these pooled securities would typically be out of reach for most individual investors — commissions, fees, and minimum purchase amounts can make them cost-prohibitive.
Investment companies typically manage mutual funds, like The Vanguard Group, along with financial professionals, hedge funds, banks, and other financial institutions.
Mutual funds are a popular choice among investors for several reasons:
Professional management: When you select a mutual fund, you are also selecting a professional to manage the investments on your behalf. Rather than researching each investment before you buy or sell, you can leave it to the professionals.
Diversification: Mutual funds can invest in a wide range of companies and industries. This diversification may help reduce risk and volatility in a portfolio by offsetting losses in one asset class with gains in another.1
Low minimum investment: Most mutual funds have a relatively low cost for initial and future share purchases compared to buying individual stocks or bonds. While mutual funds have fees associated with them,2 they allow you to invest across several securities without making individual purchases and trades, which can be costly.
Check out the Gusto Retirement fund menu to learn more about the funds we offer and their related costs.
This information is for illustrative purposes only, and is not intended to be construed as investment or tax advice. All investing involves risk, including the loss of principal. Gusto Retirement does not guarantee the performance of any specific investment.
Investment advisory services for Gusto’s 401(k) (when 3(38) fiduciary services are appointed) and SEP IRA/IRA products are offered by Gusto Investment Services, LLC, an SEC-registered investment adviser. References to “Gusto,” “we,” or “our” in this article specifically refer to Gusto Investment Services, LLC. For more information regarding fees and services, see Gusto’s ADV 2A Brochure and Form CRS.
1 Diversification does not ensure a profit or guarantee against loss.
2 Please see the mutual fund prospectus for more information about costs.