A fund manager takes that money and invests it in a diverse grouping of stocks, bonds or money market instruments. Mun said mutual funds are the best option for beginning investors because a fund manager pays attention to the market and has more expertise than the average investor. Mun said these accounts are best when you have money you want ot keep safe and you're not sure on how or where to invest it. The advantage of these accounts is that they perform better than savings accounts and therefore keep your money growing at a rate higher than inflation. Kobliner states that in her experience, money market funds are less risky than stock or bond funds.
Stock funds invest in stocks, which are the equivalent of owning part of a company.
Funds will either invest in growth stocks or income stocks. Income stocks tend to pay dividends to their stockholders. Mun said that this fund is for those who are more conservative, because investors receive checks showing exactly how much they earn. The other option is funds that invest in growth stocks. Mun said these funds can be riskier because they are based on the capital gains that the fund manager creates by buying stocks at a low price and selling at a higher price.