From the course: Planning for Retirement
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Mutual funds and diversification
From the course: Planning for Retirement
Mutual funds and diversification
- Stocks and bonds are the basic building blocks of an investment portfolio. But let's take it a step further and talk about mutual funds and how to diversify your portfolio. A mutual fund is a collection of stocks or bonds that you purchase as a unit. Mutual funds enable you to buy one share of the mutual fund and own hundreds, or even thousands, of stocks or bonds within the fund. Mutual funds, which are typically what's offered in employer-sponsored plans, and available in most IRAs, too, are a great way to have a more diversified portfolio with a lot less work than choosing every single stock or bond yourself. Speaking of diversification, I recently explained diversification to my seven-year-old and after quite a bit of explaining, during which he was totally silent and I questioned whether he was actually listening to me at all, he says to me, "So diversification is buying "a little bit of a lot of things "just…
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