Mutual funds are confusing to people because they are not explained clearly. They are actually quite simple. A Mutual Fund is like a shopping cart of investments. When you go to the market, being the fabulous Domestic Engineer that you are, you know which products are the best value for the best price, don’t you? We are know our favorite bread, the best ice cream, the freshest lettuce and our favorite wine. We notice when those products go on sale, and we also notice when their prices go up. The money managers in charge of the portfolios of mutual funds are doing that same kind of shopping, just in the world of stocks and bonds.
The phrases “financial planning”, “family finance” and “estate planning” are ones we hear often in the media. There always seems to be one expert or another touting their wisdom or promoting an idea or product. Much of the information out there seems to be contradictory. However, there are some basic truisms in finance, and that is what I will focus on in this chapter.