How does a 401K account make money??
Question:
Example..I'm in a Goldman Sachs Mid Cap Value account and it says the share price is 32.7769.is this a stock that I am buying?
Answer:
401k accounts do not always "make money". Sometimes the value of your fund will fluctuate depending on the market and the individual securities held by each fund. A few years ago I worked for a company that tracked mutual fund performance and investment data. You would not believe how many funds held Enron stock when it tanked (the fund shareholders probably didn't even have a clue).
While 32.7769 is the price of a share of the Goldman Sachs Mid Cap Value fund - it in itself is not an actual "stock". The Goldman Sachs Mid Cap Value fund is comprised stocks that are invested in different companies. Let's say you have $1000 invested in this fund - that would mean that you have about 30 shares (based on the figure you provided).
The thing is - each fund has an investment objective (that determines the goals of the fund and type of investments it will target) it is up to the portfolio manager to choose the stocks that best meet the criteria of the given fund.
Here is some information on your fund.
http://finance.yahoo.com/q/pr?s=gcmax...
Do you receive shareholder reports on your fund? This would give you a wealth of information on the funds objective, performance, and a portfolio listing (my favorite ). The portolio listing (or holdings) would tell you exactly which companies the fund is investing in.
Call whoever is managing your 401k and ask them to send you a prospectus, and the most recent shareholder report. Read both documents and call customer support about anything that you don't understand.
What you are asking is, how doesamutual fund work.
You are buying an instrument that a professional manages and which invests in underlying stocks, bonds, etc.
You have no claim to the underlying securities. However, the mutual funds value will change based solely on the value of theunderlying securities (less some fees)
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