When it comes to making investments, there’s always going to be safety in numbers. And investing in mutual funds perfectly captures the essence of this principle. You see, the biggest mutual funds in the world operate with a staggering amount of assets (worth trillions).
And with such a large AUM (assets under management), there are usually quite a lot of benefits. For example, you have minimised expense ratios, which consistently enhance the performance of the mutual fund you’ve invested in over time.
Moreover, the largest mutual funds also offer the guidance, expertise, and financial prowess of powerful money managers that are always hell-bent on maximising your financial wellness (albeit for a fee).
In this article, we will talk about some of the best funds and what they invest in. We’ll also briefly examine some differences between hedge funds and mutual funds.
5 Powerful Funds and What They Invest In
Vanguard ETF (S&P 500)
When it comes to sheer diversity and exposure, it doesn’t get any better than the Vanguard ETF S&P 500 fund. It has investments in a gigantic amount of stocks in some of the biggest corporations in the US. As an exchange-traded fund, Vanguard tracks the S&P 500 stock index as it owns the entirety of the equities within the S&P 500.
To stick your fingers in the pie with Vanguard, the minimum investment threshold is $3,000. And this $3,000 will provide you with unparalleled access to the best stock exposure throughout the US. With over 4,000 stocks in holding, Vanguard offers investments in a variety of instruments, such as the stock and equity markets and owns stocks in companies such as Tesla, Apple, Amazon, and Microsoft.
Black Rock Inc. is referred to as being one the largest investment management and holding companies in the world. The organisation has over $10 trillion in assets that it manages globally. With a market capitalisation surpassing the $112 billion-mark, Black Rock is primarily a publicly traded organisation and also offers cutting-edge financial and technology solutions to both retail companies and financial institutions across the globe.
Black Rock offers a diverse array of mutual funds and asset portfolios and provides broad spectrum trading capabilities such as equities, fixed income, and money market instruments. Many clients rely on Black Rock to invest in mutual funds and ETFs as well.
Fidelity Investments is another juggernaut of the financial world and is amongst the biggest in the US. The company offers a slew of some of the best financial products and solutions to over 40 million customers. Fidelity invests in the bond market, stock market, exchange-traded funds (ETFs), mutual funds, futures & options, foreign exchange, and cryptocurrency.
Vanguard 500 Index Fund Admiral Shares
The Vanguard 500 FIAX is similar to the S&P 500 index and invests in the top 500 US-based corporations listed on the stock market throughout a diverse range of industries. Some of the biggest holdings in the Vanguard FIAX portfolio include Nvidia, Berkshire Hathaway Inc., Apple, Amazon, and Tesla.
Vanguard Total International Stock Index Fund Admiral Shares
The Vanguard VTIAX fund offers investors exposure to performance indexes that comprise a dearth of stocks from both developing nations and developed economies. Its external asset holdings contain more than 7,700 stocks and account for 25% of assets from developing nations, 40% from top companies in Europe, and up to 27% from Pacific companies.
Some of the largest Vanguard International Stock Index Fund Admiral Share holdings include Nestle SA, Samsung Electronics, Toyota Motor Corporation, and Taiwan Semiconductor Manufacturing.
Mutual Funds vs Hedge Funds: Briefly Looking at Some Differences
Mutual funds and hedge funds are managed investments and stock portfolios developed from amalgamated funds that aim to acquire high and stable returns via asset diversification. The investment portfolio is managed by a team of financial managers that utilise these investments from different companies and individuals to invest in a variety of trading instruments and securities following a blend of different strategies.
Mutual funds are developed by institutional financial managers for institutional traders with a diverse collection of investment options. Hedge funds, on the other hand, are specifically designed for high-profile and influential investors and traders. To invest in a hedge fund, you are required to meet some specified conditions or characteristics, such as having a high net worth.
The Primary Differences Between Mutual Funds and Hedge Funds in a Nut Shell
A mutual fund gives access to trading vehicles that are sourced from a group of investors, managed by a well-reputed and accredited fund manager that invests in basket securities. Hedge funds, however, are made up of specific asset portfolios that only a small number of well-established investors can invest in.
The primary aim of mutual funds is to offer investors a source of steady returns at a risk-free rate. In hedge funds, investors can stand to earn substantial amounts in returns in line with the amount of capital they inject.
Mutual funds are made up of investments injected by everyday working people who set aside a percentage of their monthly disposable income to earn steady, monthly dividends. In contrast, hedge funds are typically made up of high-net institutional investors, prominent business moguls, and large corporations that want to earn more significant returns and have the power to hedge against possible risks. These investors aim to earn the most significant amount of profits as quickly as possible.
Although mutual funds and hedge funds are operated and controlled by institutional financial managers, in the case of a mutual fund, the manager isn’t specifically interested in how the fund functions. However, hedge fund managers have a professional stake in the quality of the funds they manage and have to ensure that the fund sails smoothly, as every decision, no matter how big or small, can positively or adversely impact the interest of the overall fund.
Last but not least, while mutual funds are strictly governed and regulated by the SEC (U.S. Securities and Exchange Commission), hedge funds are exempt from stringent regulations.