1. Getting set up
Define your goals
First off, you need to think about the reason you’re investing, what your goals are, and when you’ll probably need to access your money. Different mutual fund accounts have different rules about taxes and withdrawals, so the account type you choose to put your mutual fund in should align with your investing goals:
Next, you’re going to need some seed money–more is good, but you can get started with a Thrivent mutual fund with as little as $50 a month with an automatic recurring investment ($100 for the Thrivent Money Market Fund and Thrivent Limited Maturity Bond Fund). This may not seem like a lot, but starting small and starting early can pay off because returns can grow exponentially over time.
Finding your mutual fund
Finally, you’ll need to choose a mutual fund or funds to invest in. There are a lot of choices. Some funds, such as asset allocation funds, are designed to align with the level of risk investors are willing to tolerate in exchange for greater growth potential. Other funds focus on particular parts of the economy—like natural resources or utilities—or on certain types of stocks and bonds. With so many fund options and types it can be helpful to compare funds, which can be done here. To learn more about an individual fund, review the prospectus. Every fund has a prospectus, which is a required document that outlines all of the information about the fund. It is a great resource to review before deciding on a fund. For a good overview of mutual funds and how they work, read the What is a Mutual Fund? article.
Thrivent Mutual Funds offers more than 20 funds across four categories—enough options to cover most mutual fund investing needs without being overwhelming. Chances are, there’s probably a fund to match your needs.
Setting up an account
Once you have your account type, the amount of money you’re going to start off with and have selected a mutual fund that aligns with your goals and risk tolerance, you’ll need to go ahead and set up a mutual fund account. You can complete an application with Thrivent Mutual Funds online. Different accounts will require slightly different pieces of information to complete the application, but here are the kind of things you’ll want to have handy:
- Full names of people to be included as account owners and beneficiaries
- Social Security numbers
- Your bank account number and the bank’s routing number
- Contact information like email and phone numbers
While not the only way to start, you can easily transfer money from your bank to start your new mutual fund account. This can be set up as a one-time transfer or recurring contribution that meets the minimum requirements for the mutual fund and account type. With Thrivent Mutual Funds, once you’ve completed the application (it should take as little as 10 minutes), you’ll be asked to set up online access for your account, including your user ID and password. Your account will be active, but it will take a few days for your initial contribution to appear.
2. As years go by…
Tracking your progress
Unless you’re actively buying and selling your shares, a mutual fund account doesn’t require very much day-to-day oversight on your part. Thrivent Mutual Funds has fund managers and analysts who work to ensure that the fund’s holdings and allocations remain aligned with the fund’s strategic goals (so you don’t have to) and level of risk. All of your account details are always available online and you can set your preferences to receive email confirmations of purchases or notices when new documents are available, such as quarterly statements. You can also opt for paper or digital delivery of key documents.
Dealing with taxes
No matter the account type you’ve chosen, you’ll probably receive tax forms every year. These will be mailed to you and will also be available online. More information about the different tax forms, who should expect to receive them, and when they will be made available can be found in the Tax Resource Center. Be sure you share all tax forms you receive with your tax advisor.
As the years pass, you should consider checking back in on your investing goals and risk tolerances to ensure your investment approach still fits your future needs. Also, it’s a good idea to consider gradually increasing your retirement contributions over time, especially if your income increases over the years. For more information about IRA contribution types and limits, review our IRA contribution limits page.
It’s also a good idea to revisit the beneficiary designations for your accounts and make sure they’re up-to-date and remain consistent with how you want to pass along your investments. For more information about the different types of beneficiary options, read the Why it pays to do beneficiary planning article.
Weathering the ups and downs
When you invest in the market, there are going to be bad days and good days, but historically the stock market has trended upwards over the long haul. Since most mutual funds are structured with some level of diversification of holdings, it should make these inevitable market swings much more tolerable. However, keep in mind that while diversification can help reduce market risk, it does not eliminate it. For more information on staying invested through the market ups and downs, read the Top 4 Long-Term Investment Strategies to Help Increase Gains article.
3. Taking it out or passing it along
Remember those goals? Once you reach them or reach a certain age, you need to think about what to do with your mutual fund investments. If you have a general investment account (single or joint ownership) you are free to withdraw your money at any time without restriction. If you’ve invested in a retirement account, here are some options:
- At age 59½ or over, you can start taking penalty-free withdrawals of earnings from IRAs. Earlier withdrawals can also be taken, although you may face a 10% penalty unless you fit certain criteria.
- At age 72, Required Minimum Distributions (RMDs) need to be taken from traditional IRAs.
- Roth IRAs don’t require any withdrawals by the current account holder. Therefore, this type of account can be passed along to your beneficiaries as an inherited IRA if you wish.
- Remember, your beneficiaries can also be charitable organizations and distributions can be used to donate to charities.
Our IRS Contribution and Distribution Rules article provides a more detailed exploration of your options. Ultimately, there are potential tax ramifications for both you and your beneficiaries whenever you take a distribution from a mutual fund account, so it’s wise to discuss all of this with your tax advisor.
Whatever you decide, make sure to do your research and consider all of your options. If you have any questions, a financial professional is here to help.
Ready to open a mutual fund account? Start here