Log inSign up for FREE
Library

3.06 Investing in Funds

Last updated 2 months ago
8 questions
Note from the author:
Warm-Up/Intro:
1

Imagine you’re buying a dozen donuts for you and your friends. Would you buy all 12 in the same flavor? Or would you buy a box that has a variety of flavors? Why?

ARTICLE: What is a Fund? đź“·6 min

In the same way that you’d likely buy a box of donuts with a variety of flavors, it’s a good strategy to invest in a variety of stocks so that you can minimize risk. While you can individually pick stocks and manage them yourself, most people buy shares of funds that have a collection of stocks. Read through this article, starting from How Do Funds Work?, to learn about funds. Then, answer the questions.
1

In your own words, describe how investing in a fund is a more diversified approach than investing in a single stock or bond.

1

What question(s) about funds do you have now that you’ve seen the variety of fund options available to you?

VIDEO: What is Active and Passive Investing? đź“·5 min

In the previous article we learned that some funds are actively managed by a fund manager while other funds are not. Watch this video to learn about the difference between active investing and passive investing. Then, answer the questions.
1

This is in your notes book:

1

Do you think you would want to invest in a passively managed fund or an actively managed one? Why?

ACTIVITY: MOVE: Let’s Make a Mutual Fund

Let’s take a closer look at how funds work and why they are a more diversified approach to investing when compared to picking individual stocks. Follow the directions on the worksheet to complete this activity.
Exit Ticket:
1

When talking about investing, what does it mean when someone refers to a fund?
  1. A type of savings account that you can use for emergency expenses
  2. A pool of money from shareholders that is used to invest in a collection of assets like stocks and bonds
  3. A way to crowdsource money from people online to help pay for an expense
  4. An amount someone has in their checking account

1

The goal of an actively managed fund is to outperform the market. What does this mean?
1. The fund is guaranteed to provide a rate of return that is lower than the overall market
2. The fund will match the overall return of the market
3. The fund is managed by a fund manager, who tries to beat the overall market’s rate of return
4. If the actively managed fund does not beat the market, the fund manager will pay you the difference

1

All of the following are true about a passively managed fund EXCEPT…
1. Fees for a passively managed fund are typically lower than those for an actively managed fund
2. Passively managed funds are generally seen as low risk investments
3. A passively managed fund seeks to match the average return of the securities it includes
4. Passively managed funds are managed by a fund manager