Mutual Fund

All investments involve some degree of risk when purchasing securities such as stocks, bonds, or mutual funds -- and the actual risk of a particular mutual fund will depend on its investment strategy, holdings, and manager competency. Unlike deposits at FDIC-insured banks and NCUA-insured credit unions, the money invested in securities typically is not federally insured."}},{"@type": "Question","name": "Can Mutual Fund Shares Be Sold at Any Time?","acceptedAnswer": {"@type": "Answer","text": "Yes, mutual funds are considered liquid assets and shares can be sold at any time. While mutual funds themselves only price their shares once per day based on net asset value, investors are able to place orders to sell their mutual fund shares at any time. Review the fund's policies regarding exchange fees or redemption fees. There may also be tax implications for capital gains earned with a mutual fund redemption."}},{"@type": "Question","name": "What Is a Target Date Mutual Fund?","acceptedAnswer": {"@type": "Answer","text": "When investing in a 401(k) or other retirement savings account, target-date funds, or life-cycle funds, are a popular option. Choosing a fund that is dated around retirement, like a hypothetical FUND X 2050 (which would target a 2050 retirement year), the fund promises to rebalance and shift the risk profile of its investments, commonly to a more conservative approach, as the fund approaches the target date.

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Mutual Fund

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Yes, mutual funds are considered liquid assets and shares can be sold at any time. While mutual funds themselves only price their shares once per day based on net asset value, investors are able to place orders to sell their mutual fund shares at any time. Review the fund's policies regarding exchange fees or redemption fees. There may also be tax implications for capital gains earned with a mutual fund redemption.

When investing in a 401(k) or other retirement savings account, target-date funds, or life-cycle funds, are a popular option. Choosing a fund that is dated around retirement, like a hypothetical FUND X 2050 (which would target a 2050 retirement year), the fund promises to rebalance and shift the risk profile of its investments, commonly to a more conservative approach, as the fund approaches the target date.

All funds carry some level of risk. With mutual funds, you may lose some or all of the money you invest because the securities held by a fund can go down in value. Dividends or interest payments may also change as market conditions change.

As with any business, running a mutual fund involves costs. Funds pass along these costs to investors by charging fees and expenses. Fees and expenses vary from fund to fund. A fund with high costs must perform better than a low-cost fund to generate the same returns for you.

Even small differences in fees can mean large differences in returns over time. For example, if you invested $10,000 in a fund with a 10% annual return, and annual operating expenses of 1.5%, after 20 years you would have roughly $49,725. If you invested in a fund with the same performance and expenses of 0.5%, after 20 years you would end up with $60,858.

It takes only minutes to use a mutual fund cost calculator to compute how the costs of different mutual funds add up over time and eat into your returns. See Mutual Fees and Expenses to learn about some of the most common mutual fund fees and expenses.

Index ETFs offer the same low costs, broad diversification, and tax efficiencies as index mutual funds. Similar to conventional index mutual funds, most ETFs try to track an index, such as the S&P 500. The main differences are that ETFs provide real-time pricing and a lower minimum investment than an index mutual fund, because you can purchase as little as 1 share of an ETF.

For more information about Vanguard funds or ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (which may charge commissions). See the Vanguard Brokerage Services commission and fee schedules for full details. Vanguard ETF Shares are not redeemable directly with the issuing fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Bond funds are subject to the risk that an issuer will fail to make payments on time and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility.

Start with your savings goals to get an idea of how aggressive you want your investments to be based on your risk tolerance and how long you'd like your money to be invested. Then determine the best asset allocation for your goals, and select a mutual fund to help build your diversified portfolio. Once you identify your investment time horizon and your portfolio's allocation, you might also want to consider whether you want an index fund or an actively managed fund.

Index funds, also known as passively managed funds, are built to follow a market benchmark like the S&P 500 Index or Dow Jones Industrial Average. Active funds are managed by fund managers who handpick the fund's investments in an attempt to beat the market. ff782bc1db