Course index:
- Basic Concepts of Money and Personal Finance
Introduction to the value of money, the importance of saving, and spending control. - Budgeting and Financial Planning
Create a personal budget, manage income and expenses, and set financial goals. - Inflation and Purchasing Power
Explanation of how inflation affects the value of money over time. - Interest Rates and Time in Finance
Differences between simple and compound interest rates and their importance in investments. - How to protect your savings. Protect yourself from scams.
How to protect your money from the scams that abound today - Basic Savings Instruments
Explanation of savings accounts, term deposits, and how they work. - Introduction to the Stock Market
Basic concepts of the stock market and its role in the global economy. - Actions: What They Are and How They Work
Explanation of stocks, types (common and preferred), and how to invest in them. - Bonds: What They Are and How They Work
Differences between corporate and government bonds, and their importance in diversification. - Risk vs. Return on Investments
Concept of risk and how it affects investment choices. - Diversification and Creation of Basic Portfolios
Basic diversification principles to reduce risk in an investment portfolio. - What is an ETF and How Does it Work?
Introduction to ETFs (exchange-traded funds) and how they track market indices. - Introduction to Mutual Funds <<<<<<<<<<<<<<<<<<<<<<<<<<<<
An explanation of mutual funds and their benefits for beginners. - Financial education for the family.
- Economic Cycle and its Impact on Investments
How the stages of expansion and contraction in the economy affect investments. - Growth Stocks vs. Value Stocks
Differences between these types of actions and when each is appropriate. - Fundamental Analysis of Stocks
Explanation of how to analyze a company's value based on its fundamentals. - Basic Technical Analysis: Charts and Patterns
Introduction to basic technical analysis tools, such as trend lines and candlestick patterns. - Options: What They Are and How They Work
Basic concepts of call and put options and their uses in investments. - Futures: What They Are and How They Work
Introduction to futures contracts and their application in investment and speculation. - Introduction to Cryptocurrencies
What is digital money, how it was created, and the characteristics of Bitcoin and other cryptocurrencies. - Blockchain and its Importance in Finance
How the technology behind cryptocurrencies works and their applications in finance. - Risks in Cryptocurrency Trading
Volatility, fraud, and regulations in the cryptocurrency market. - Leverage Principles and its Risk
What it means to trade with leverage and the associated risks. - Investor Psychology and Emotion Management
How emotions influence investment decisions and tips for managing them. - What is Algorithmic Trading
Basic explanation of the use of algorithms to perform operations in the financial market. - Financial Analysis of Companies
Introduction to basic financial statements and their interpretation for valuing companies. - Investing in Commodities: Gold, Oil, and Other Goods
How commodity investments work and their role in diversification. - Advanced Investment Strategies: Hedging and Derivatives
Introduction to strategies for managing risks through financial derivatives. - Creating and Managing a Complete Portfolio
Practical application of prior knowledge to build and manage a diversified portfolio.
What are mutual funds?
In the previous lesson, we talked about ETFs, those exchange-traded funds that are like a basket full of bits of companies, gold, or whatever, and that you can easily buy and sell on the market. Today we're going to delve into a similar but different world: mutual funds. If ETFs seemed like a practical way to invest, mutual funds also have their advantages, and are an option that many people use to grow their money without too much hassle.
A mutual fund is like a group of friends who get together to put money in one place and let someone else, an expert, manage it for them. Imagine that you and your neighbors want to invest, but none of you know how to do it well or have the time to watch the market every day. So, you pool your money, give it to a friend who's very knowledgeable about numbers, and say, "Here, do something good with this." That friend would be the fund manager, and what he or she does is use all that money to buy things like stocks, bonds, or even cash, depending on the type of fund.
The idea is simple: you contribute your share, others also contribute theirs, and the manager is responsible for investing all that money in a variety of different places. In the end, the profits (or losses) are shared among everyone based on how much each person contributed. It's a way to invest without having to do everything yourself, and the great thing is that you don't need to be a financial genius to get involved.
How do mutual funds work?
To understand how they work, let's consider an example. Let's say you have 20,000 pesos and want to invest them. If you were doing it alone, you'd have to choose what to buy yourself: company stock? Government bonds? Something else? And on top of that, you'd have to keep an eye on whether the value of the asset goes up or down. With a mutual fund, on the other hand, you give those 20,000 pesos to the fund, and the manager pools them with money from other investors—let's say they total 10 million pesos. With that mountain of cash, the manager buys a bunch of things: stocks in companies like Mercado Libre or YPF, bonds that pay interest, or even stashes a little cash just in case.
You don't have to decide any of that. The manager, a trained professional, handles everything: choosing what to buy, when to sell, and how to manage risk. In return, you receive a portion of the fund, called a "share." This share is like your entry into the club: it tells you how much of the profits (or losses) you'll get based on your investment. If the fund does well and grows, the value of your share increases, and if you want, you can sell it to withdraw your money with the profits.
One important thing is that mutual funds aren't bought and sold on the stock exchange like ETFs. Instead, you give your money directly to the fund (or through a bank or platform), and when you want to withdraw, you ask for your portion back. This is usually done at the end of the day, not at any time like with ETFs. It's a slightly more relaxed system, but just as useful.
Differences between mutual funds and ETFs
Since we discussed ETFs in the previous lesson, let's clarify the differences with mutual funds. Although they are similar in some ways, they have their own rules.
First, ETFs are bought and sold on the stock exchange, just like buying shares in a company. This means you can enter and exit at any time of day while the market is open, and the price changes constantly depending on what people are willing to pay. Mutual funds, on the other hand, are not traded on the exchange. You put your money directly into the fund, and when you want to leave, you ask the fund to return your portion, but this is done at the closing price of the day, not instantly.
Another big difference is who manages the money. In ETFs, the basket is already assembled and typically tracks an index, like the S&P 500 or the Nasdaq 100, without anyone constantly touching it. It's like a fixed recipe: the ingredients don't change much. In mutual funds, on the other hand, there's an active manager who decides what to buy or sell based on how they view the market. This can be good, because the manager can adjust things if something goes wrong, but it also means you're dependent on that manager being good at what they do.
Plus, the costs are different. ETFs typically have lower expenses because no one actively manages them; they just track an index. Mutual funds, because they have a manager working every day, usually charge a higher fee, called a "management fee." This isn't necessarily bad, but it does mean you keep a little less profit in your pocket.
Finally, ETFs give you more flexibility to move quickly, while mutual funds are more for those who want a more relaxed approach and don't mind waiting a day to enter or exit. If you like the idea of having someone else make decisions for you, mutual funds are great. If you prefer something more automatic and something you can control instantly, ETFs are the way to go.
Examples of mutual funds
Now that we understand how they work and how they differ from ETFs, let's look at some examples of mutual funds you might find, especially in Argentina, where this tool is quite popular. Not all of them have well-known names like SPY or QQQ, as they often vary depending on the bank or company offering them, but I'll give you a general idea.
First, there are fixed-income funds. These are the most peaceful and secure. They invest in things like government bonds or fixed-term deposits, which pay you interest over time. For example, a fixed-income fund in pesos could be the "Super Savings Peso Fund" from an Argentine bank. It's ideal if you want to take care of your money and have it grow slowly but smoothly.
Then there are equity funds. Things get more complex here, as they invest in company stocks, such as YPF, Banco Galicia, or even foreign companies. An example would be the "Argentine Stock Fund" from a management company. These funds can rise significantly if companies are doing well, but they can also fall if the market becomes difficult.
There are also mixed funds, which combine a bit of everything: bonds, stocks, and sometimes even cash. An example would be a financial institution's "Balanced Fund." They're an intermediate option, neither as risky as pure stocks nor as stable as fixed-income funds.
Finally, there are funds that invest in specific assets, such as dollars or foreign markets. For example, the "Fondo Dólar MEP" lets you invest in dollars through the Argentine stock market, or an international fund that buys shares in American companies like Apple or Amazon. These are more for those looking to diversify abroad.
Why are mutual funds a good investment option?
Mutual funds have several advantages that make them attractive, especially if you don't want to get into the hassle of investing on your own. Here's why they're a great option.
First, they take the work off your shoulders. You don't have to analyze companies, read financial news, or look at strange charts. The fund manager does all that for you, and since they're professionals, they usually know how to handle things better than someone just starting out.
Second, they give you access to more things. With 20,000 pesos alone, you couldn't buy much on your own: maybe a few stocks or a bond. But by putting your money into a mutual fund, that money is pooled with other people's, and the manager can invest in a lot of different places. It's like joining a club where everyone contributes and everyone wins.
Third, you can start small. Many mutual funds in Argentina allow you to start with small amounts, such as 5,000 or 10,000 pesos, depending on the institution. This makes it accessible to anyone; you don't need to be a millionaire to get started.
Fourth, there are options for all tastes. If you prefer to play it safe, there are fixed-income funds. If you're up for something riskier, there are equity funds. And if you want a balanced portfolio, mixed funds are a good option. You choose based on how much risk you want to take.
Fifth, they help you diversify. Because the fund invests in many things at once, you don't depend on the success of a single company or bond. If something fails, other investments can compensate, which lowers the overall risk.
Finally, they're easy to follow. The companies that manage the funds send you reports so you can see how your money is doing, and you can often check them online or on an app. It's not like ETFs, which you can see in real time on the stock market, but you still stay up to date without going crazy.
How to get started with mutual funds?
If you're interested in the idea and want to get involved with a mutual fund, getting started is pretty simple. Here are the basic steps.
First, find a place to invest. In Argentina, banks like Santander, Galicia, and BBVA often offer mutual funds, as do investment management companies like Consultatio or Galileo. You can also use online platforms that show you various options.
Second, decide how much you want to invest. It doesn't have to be much: 5,000 or 10,000 pesos can be used in many funds. The important thing is to use money you don't need for urgent expenses, like rent or food.
Third, choose a fund you like. Determine whether you want something safe (fixed-income), riskier (equity), or a mix (mixed). Read a little about the fund, what it invests in, and what fees it charges, to make sure it's right for you.
Fourth, open an account. If you're using a bank, you can do so directly at the branch or through online banking. If it's a management company, it's usually done online or with an advisor. They'll ask for some basic information, such as your ID and a bank account to transfer money.
Fifth, invest your money. Once you have the account, you send the money to the fund and they give you your shares. Then, you just have to wait for the manager to work their magic.
Sixth, track your progress. You can ask the fund to return your money whenever you want (sometimes there's a minimum number of days you can stay), and they'll give you the value of your share at that time, including any profits or losses.
A practical example to make it clear
Let's imagine Juan, an office worker who saves 15,000 pesos a month. Juan knows nothing about investments, but he wants his money to grow. In the previous lesson, we saw that he could have chosen an ETF like the SPY, but this time he decides to try a mutual fund. He goes to his bank, opens an account, and puts 15,000 pesos into a mixed fund that invests half in bonds and half in Argentine stocks.
At first, nothing much happens, but Juan continues to contribute 15,000 pesos each month. After three years, he looks at his account and sees that his initial 15,000, plus what he added, has grown to 600,000 pesos. The fund manager took advantage of rising stocks and bond yields, and although there were some slow months, overall he came out ahead. Juan didn't have to do anything more than contribute the money and wait.
Differences in practice: ETFs vs. mutual funds
To be clear, let's think about John with the two options. If he had chosen the SPY ETF, he would have bought small pieces on the stock market and could have sold them at any time during the day, seeing the price in real time. With the mixed mutual fund, on the other hand, he had to wait until the close of the day to enter or exit, and he didn't choose the investments himself, but left everything in the hands of the manager. The ETF would have been cheaper in fees, but the mutual fund gave him the peace of mind that someone was handling things for him. It depends on what each person prefers: control and low costs with ETFs, or delegation and relaxation with mutual funds.
Tips for investing in mutual funds
Before finishing, I'll leave you with some recommendations to help you do well.
First, don't despair if there are declines. The market goes up and down, but over the long term it usually stabilizes. Patience is key.
Second, only use money you can afford to risk. Don't invest only what you need to live, because there's always a risk, even if it's small.
Third, compare costs. Some funds charge high fees, so be sure to check how much they charge you for management before you buy.
Fourth, understand what you're buying. Read a little about the fund: Does it invest in stocks? Bonds? Dollars? That way you know what to expect.
Fifth, start small. You don't have to put in all your savings at once. Try a small amount, and if you like it, add more later.
Conclusion: Mutual funds, a practical alternative
In closing, mutual funds are a simple and accessible way to grow your money without having to become an expert. Unlike ETFs, which we discussed in the previous lesson and give you control and flexibility in the stock market, mutual funds offer the convenience of delegating decisions to a professional manager. They're ideal if you want to diversify, start small, and let someone else handle the hard work for you. They have their costs and aren't as immediate as ETFs, but for many, the peace of mind is worth it.
If you're looking for a hassle-free investment option with someone to guide you, mutual funds may be the way to go. Are you up for trying them? With a little curiosity and a few pesos saved, you can start making your money work for you.
Next course date
Questions for you to reflect on
Why do ETFs end up being superior to mutual funds?
What problems can FCIs present?
What are the advantages of FCI?
A brief overview of The Pocket Investor
The Pocket Investor is a project that combines experience and passion for financial education to help you transform your relationship with money. Through personalized mentoringWe help you design investment strategies tailored to your goals and needs, optimizing your portfolio to address challenges like inflation and the dollar.
The books on finance and investment, including the popular The Argentine Pocket Investor - El Inversor de Bolsillo argentino, are practical tools that explain complex concepts in a simple way, bringing the world of investments closer to anyone interested in financial growth.
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