401(k) Plans, Mutual Funds, and Securities 

401(k) Plans, Mutual Funds, and Securities 

Saving for the future is something that you should start doing now. Indeed, the more you put away now, the more you’ll have when you need it. Rather than just putting money into a savings account, investing is one of the best ways to not only save money, but also maximize returns. If you’re unsure about how to best invest your money and the types of investment accounts that exist, our professionals at Prosper Financial can help. Here’s what you should know about 401(k) plans, mutual funds, and securities—

Understanding 401(k) Plans, Mutual Funds, and Securities

There are different investment options that may make sense depending on your personal situation and your goals for growing your money over time. As you learn more about investing, three common terms that you may encounter are 401(k) plans, mutual funds, and securities. 

• 401(k) plans. A 401(k) plan is a type of employer-sponsored retirement plan. This type of retirement savings plan is tax-advantaged, which usually means that contributions that are made towards your 401(k) are tax-deferred—you don’t have to count this amount towards your total income for purposes of calculating income tax. Usually, both an employer and an employee will make contributions to this type of plan. 401(k) plans often include mutual funds. 
• Mutual funds. Because 401(k) funds often include mutual funds, it’s important to understand what mutual funds actually are. As the name may imply, mutual funds are pooled funds that are used to purchase securities, stocks, or bonds that an individual could not afford to purchase on their own. Each shareholder of the mutual fund—or each investor—will experience gains or losses in the fund proportional to their investment. 
• Securities. Finally, it’s necessary to understand securities. Securities are financial instruments that hold some type of financial value. There are three primary types of securities: equity, debt, and hybrids. These three types are further broken down into other types that may sound more familiar, such as bonds and stocks. 

Why Put Money Into an Investment Fund?

If you’re on the fence about investing your money, it’s important to talk to a financial professional. While some individuals think that saving up for a rainy day in cash or in a savings account is the best way to prepare for the future, investing money over time is the best way to grow one’s wealth and ensure that money will be available for retirement or in the event of an emergency. What’s more, the earlier that you start investing and the more you put away now, the more time that your investment will have to grow. 

Get Help Planning for Retirement from Prosper Financial

If you have questions about 401(k) plans, mutual funds, and securities, talking to a financial professional can help. At Prosper Financial, we provide investment advice and management options that you can trust. To learn more about working with our professional team and what to expect when you choose our firm, call us directly today.