Understanding mutual funds/which ones to invest in

Investing
#1

Hi! I have a Roth IRA through vanguard & bought a mutual fund for $1k (it’s a target retirement 2055 fund) when I had saved up enough money to do so. I’m now contributing to my IRA at a higher amount each month and have saved up another $3k. This $3k is sitting in a Money Market Fund. My plan was to purchase another mutual fund once I hit this amount since that seemed to be the next level minimum that MFs cost. My problem is I have no idea how I now decide what the next fund I should invest in is? Should I be purchasing different funds or dumping everything into my Target Retirement fund?

Mutual funds are honestly very difficult for me to wrap my head around so any way you can help break it down a bit would also be greatly appreciated :slight_smile:

#2

Hey Megan! You can do it!

TLDR: Just dump that $3K and all future money into that exact same 2055 target date fund.

So mutual funds are a broad term to describe this convenient way to invest money into a diversified fund instead of picking and choosing stocks yourself. This video might help:

Mutual funds CAN do a lot of stuff (like invest in specific types of stocks, hire a smart manager to try to beat the market, just invest in really safe stuff like cash, etc)

So which MUTUAL FUND do you buy? It turns out, you stumbled upon my favorite way to invest: A target date index fund! It’s a mutual fund that’s designed to be an “all in one package”. It’s diversified across the total US stock market, the total international stock market and the world bond market! That means by buying JUST THAT ONE THING, you are guaranteeing yourself your fair share of all market growth. That’s really the only decision you’ll ever need to make inside of your IRA. The future challenge is to fill it up every year, and put all the contributions into that fund!

Here’s an article on target date index funds:

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#3

This was incredibly helpful, thank you so much! I moved that money over into the target date index fund.

My dream is to max out my IRA and 401k one year, still a little ways away from being able to do so, but some day :slight_smile:

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