Complete Guide to Start Investing in Mutual Funds for Young Investors

Have you ever heard of mutual funds for young investors and wondered if it is worth investing?

Most of us leave school knowing how to solve Bhaskara, but with no idea what to do with the salary of the first internship. And then, adult life arrives with bills, decisions, anxiety and the idea of investing seems distant. However, the truth is that investing is for everyone.

What about mutual funds? Well, they are great alternatives, especially for beginners, as the chances of losing money decrease. The reason is that with a single fund, you will be investing in several different companies at once.

However, like any investment, mutual funds for young investors have risks. And to be honest, they won’t make you rich overnight. Still, they are interesting thinking about the future.

Why should young people invest from an early age?

When you start investing early, you have the advantage of compound interest. Therefore, the sooner you start, the greater their effects.

We recommend that you start by saving little. For example, if you start with US$ 100.00 per month, from the age of 20 and leave it invested until you are 60, with an average return of 10% per year, you will have more than R$ 600 thousand. Yes, that’s with a hundred dollars a month.

Now imagine if you leave it to start only at 30? Practically half of the result is lost. Time is of great importance in investing, and you are missing out on your greatest tool to make money (by investing) if you do so. In fact, mutual funds are one of the best long-term investment strategies.

What are mutual funds?

Basically, how much you are investing in this action will be putting your money in several companies. Usually the funds are divided by category. Just to exemplify, technology funds, will be investing in Apple, OpenAI, Google, among others).

Who decides where and how the investments will be applied? This is set by the fund manager. Basically, it is an investment specialist, responsible for managing the money of all investors.

5 things you should consider before choosing a fund to invest in

Not every fund is the same. However, the points we will deal with now are crucial and should always be analyzed. They are:

1. Management fee (expense ratio): It is how much the fund charges to represent you in the market. The smaller, the better, but beware, very cheap funds are unreliable;
2. Historical return: See performance over the last 5 and 10 years. Although the past does not guarantee a future, but it will present you with the average of the profits distributed;
3. Fund manager: Find out who is taking care of the fund. Ideally, it should be an experienced professional;
4. Sectors and companies included: Do you invest in tech? Health? Energy? The fund you choose should be aligned with what you believe;
5. Risk vs. profile: Small cap funds are more aggressive. The index ones, more relaxed.

Think of it like choosing a cell phone plan. Cheap is not synonymous with good — but you also don’t have to pay for the “infinite unlimited turbo” plan if you only use WhatsApp.

3 Best Mutual Funds for Youth

Now that you understand the basics. Let’s look at the main mutual fund options that make sense for those who are starting out.

1. FXAIX (Mutual funds for young investors)

For those who like security with return, FXAIX, also from Fidelity, is a classic bet. It replicates the S&P 500, an index of the 500 largest companies in the United States.

So an almost symbolic expense rate, only 0.015%. The fund has delivered stable returns, being 13.4% per year in the last ten years and 15.9% in the last five.

Apple, Nvidia, Microsoft, Amazon, Meta, and Alphabet dominate the top positions, and the strongest sectors are technology (33%), healthcare (11.2%), and financial services (12.9%).

2. NSRSX

Now, if you accept the risks, Neuberger Berman’s NSRSX may interest you. It is focused on small caps. Basically, those smaller companies, but with high growth potential.

In the last five years, the fund has had an annual return of 11.6%, It is worth mentioning that the expense ratio is 0.81%.

The largest positions in the portfolio include companies such as Sprouts Farmers Market, Piper Sandler and Applied Industrial Tech, all of which are up about 2%.

3. FSPGX

 FSPGX is an interesting choice. It seeks to reflect the return of large-cap, high-growth U.S. companies.

The expense rate is low, being only 0.035%. This fund has delivered an impressive return of 20.2% over the past five years. The

Large technology companies hold most of its capital:

• Apple (11.9%);
• Nvidia (11.3%);
• Microsoft (11%);
• Amazon (6.3%);
• Target (4.5%);
• Alphabet (6,7%).

The fund is new, but it has already shown good results. More than half of the capital is in the technology sector, with cyclical consumption (13.9%) and communication services (13%).

Mutual funds vs. investing alone?

Investing on your own can give you great results or make you lose all your money in a few days. The reason is that you need to follow the market, study balance sheets, analyze charts, and still deal with the fear of making mistakes.

Mutual funds, on the other hand, are more relaxed, you just need to make a good choice and let the fund manager make the decisions. Of course, this comes at a price (the fees), but for those who are just starting out, it is undoubtedly a safer option.

Conclusion

If there’s one thing time teaches us, it’s that waiting for the “right moment” is the worst strategy. After all, the future arrives, whether we are ready or not.

And before you think you need to understand each acronym or be an expert in macroeconomics, take it easy, over time you will master the subject, being able to make better decisions. For now, just worry about getting started.

Mutual funds for young investors are an efficient gateway for those who are still new, without experience and without the knowledge to make good decisions on their own. Open your account with a brokerage, choose a fund that suits you, invest a symbolic amount if applicable, and start watching.

Perhaps, at first, you don’t even notice the transformation. But it is there, growing in silence, like any real investment. Now, tell me, will you continue to wait or will you press ‘confirm investment’ today? You don’t need to be rich to invest, you just need the courage to take the first step.