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Blue Chip Kids: What Every Child (and Parent) Should Know About Money, Investing, and the Stock Market by David W. Bianchi

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CHAPTER 6 FUNDS (GIANT POOLS OF MONEY)

If you don't have time to do your own research on individual stocks you can invest in mutual funds, which are professionally managed, and your money is invested alongside many other investors. All you have to do is pick the right fund.

What Is a Fund?

A fund is a pool of money received from a large group of investors for the purpose of making investments in stocks or other securities.

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There are funds that focus on every kind of market sector that you can think of: high-yield debt funds; value funds; small cap funds; midcap funds; large cap funds; energy funds; real estate funds; technology funds; biotech funds; and on and on. Rather than trying to personally buy all of the stocks in those funds, all you have to do is buy shares in the fund of your choice, and the fund manager will make the stock purchases with the pooled money.

Index Funds

Some investors believe that the best way to make money in the stock market is to carefully research individual companies and buy stocks only in the most promising ones. Other investors believe it is too difficult to pick winning stocks that way and therefore you are better off buying an index fund. But what is an index fund?

An index fund is money pooled from lots of different investors that is then used to buy the exact stocks in a particular stock market index. The managers of the index funds ...

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