How to Make a Mutual Fund

How to make your mutual fund?

I have been toying with the idea for sometime on having a few long term investments in Mutual Funds. An awesome way to grow your money over time. When Robinhood added fractional shares I took this as an opportunity to create a Mutual Fund. Now, I know this is not for everyone. But I’m going to explain how I did it in case you’re interested in making your own for long term investing.

What exactly is a mutual fund?

Mutual funds are investments that pool your money together with other investors. To buy shares of a collection of stocks, bonds, or other securities that make up a portfolio. It’s great because it spreads your money across a diversified account. Mutual funds come in several styles. You can always find one that fits the sectors or company sizes you want. Whether large companies that are safe. Or smaller growth-oriented companies that can be more volatile.

Mutual Funds that come with fees. But there are Index funds and ETFs, which can do the same thing without or with minimal fees.

How I created my own mini mutual fund?

I’m calling it a Mutual Fund for fun. But what I mean is creating a diversified portfolio that you can contribute to regularly. With Robinhood, you can do this with as little as $10 thanks to their fractional shares feature.

What is a fractional share?

A fractional share is a fraction of a stock that is less than the price of one full-share. To give an example. As of this video, a share of AMZN is 2,713.82. That’s a lot of money for one share! And can discourage someone from even trying to invest. With fractional shares, you can buy $10 worth of AMZN. Which is still owning the company.

Using fractional shares and this method. I set out to create my portfolio where I was going to invest a certain amount of money across many stocks. How much you choose and how many stocks are up to you. I would suggest doing at least 10-15 and you can do as little as $5 each into each.

How to Find Stocks for Mutual Fund?

To find which stocks I wanted to put into my Mutual Fund I examined mutual funds, index funds, and ETFs. When looking I saw patterns of some of the same stock names pop up. I would research them a bit further as a candidate for my fund.

I always make sure to have a mix from different sectors. For example, if you're doing a mutual fund with 15 stocks - have 5 finance, 5 tech companies, and 5 healthcare.

Once you have your fund ready you’re all set. You can invest as little as a dollar in each of them. Make sure to invest regularly whether once a day, week, or month. Fractional shares are a great way to get into investing while doing so with a little bit of money.

Remember if this sounds like too much of a hassle. You can always s invest in an actual Mutual, ETFs, or index funds.

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