A mutual fund is a professionally managed investment portfolio of pooled money contributed by many different investors. A mutual fund will typically have a stated investment objective that indicates what type of securities are bought and may be an indicator of the level of risk associated with the fund. Examples of investment objectives include growth, income, and capital preservation.

Some of the advantages that a mutual fund offers include:

Professional Management: A professional mutual fund portfolio manager can bring the right experience and expertise required to fulfill the fund's objective.

Diversification: A mutual fund's portfolio is often diversified, investing in a number of securities that differ in varying degrees. Diversification offers investors some protection from risk, since poor performance by one security in the portfolio may be offset by good performance in another.

Accessibility: No load mutual fund shares can be purchased from the fund family directly, reducing costs typically paid by the investor to a broker or a financial representative.

Money market funds are mutual funds that invest in short-term debt instruments. They provide the benefit of pooled investments, as investors can participate in a more diverse and high-quality portfolio than they otherwise could individually. And like other mutual funds, each investor who invests in a money market fund is considered a shareholder of the investment pool, a part-owner of the fund.

Normally, a money market fund is not insured. HOWEVER, Meeder Financial is participating in the Treasury’s Temporary Guarantee Program for Money Market Funds. For more information, please click here.
 Money market funds are a type of mutual fund, although with a comparatively low investment risk. It is not a money market deposit account, which is a bank deposit and therefore, a money market fund is not guaranteed by the Federal Deposit Insurance Corporation (FDIC).

Money market funds are not bank deposits, which means you do not earn a fixed interest rate like bank savings or checking accounts do. Because a money market invests in securities, the yield of the fund may change daily.

Investors in a mutual fund can earn money in three ways.

First, if you sell your shares for more than you paid for them, you will realize a profit called a capital gain. Second, you can make money in a mutual fund through the dividends and interest payments received by the fund on the securities it owns. Finally, a mutual fund is obligated to pay capital gains to shareholders on any amount the fund realizes from the sale of securities within its portfolio.

When you establish your account, you must advise the fund company whether you want to receive any dividends or distributions in the form of a check, or if you want them reinvested in your account. A fund prospectus will state how often the fund pays both dividends and distributions.

Yes, you will likely have to pay Federal income taxes on any dividends and distributions you receive from the fund. This includes dividends or distributions that are reinvested in the fund. For taxable accounts, you will have to pay income or capital gains taxes on your Federal income tax form. For a tax-deferred account such as a traditional IRA, you will only owe taxes when you make withdrawals from your account.

If you are an investor with a taxable account, you will receive a 1099-DIV statement sometime in January. This statement will include all the dividends and distributions paid by the fund to you throughout the year. The amounts listed on your 1099-DIV must be declared on your Federal income tax form.

If you realize capital gains, through the sale of shares or through a distribution paid to you by the mutual funds, you will likely owe capital gains taxes on this amount as well. Depending on the length of time in which you owned shares in the fund, your capital gains may be classified as short-term or long-term. A short-term capital gain is realized when you sell shares you have owned for one year or less. Long-term capital gains are realized when you sell shares you have owned for longer than one year. The current tax rate for short-term capital gains is higher than the tax rate on long-term capital gains.

The Flex-funds^® is a family of "no-load" mutual funds, which means there are no direct costs owed by the investor for the purchase of fund shares. There are some ongoing expenses that are paid by the fund to cover costs for investment management, communications, and shareholder services. These expenses are paid from 12b-1 fees, which are reflected in the fund's expense ratio.

Traditional:

• Contributions may be tax deductible up to $2,000
• Earnings are tax-deferred until withdrawal, which are allowed at any time but may be subject to penalties.
• Required minimum distributions (RMD) must begin at age 70 ½.

Roth:

• Contributions are not tax deductible.
• Investments grow tax-free.
• Withdrawals of contributions may be made at any time without tax or penalty once it is a qualified distribution, and that is when:
  • (1) it is paid after the five-taxable-year period that begins with the first taxable year for which the individual makes a contribution or conversion and (2) it is paid:
    • a) to a Roth IRA owner after the owner reaches age 59 1/2, or
    • b) to a Roth IRA owner while the owner is totally and permanently disabled, or
    • c) to a beneficiary after the Roth IRA owner's death, or
    • d) to a Roth IRA owner for a first-home acquisition.
• All other withdrawals are subject to guidelines in order to avoid penalties and tax.
• No required minimum distributions.
• Contributions can continue after age 70 ½.