Involved in a finance conversation about saving for pensions, something I don’t have a clue about. Just smiling and nodding
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A lot of buying and selling on the stock market is in individual stocks. Perhaps you look at Apple and think “I’d love to own one millionth of that company” so you buy a couple shares. If Apple does well then your shares go up in value, but if something happens to them then your shares go down in value.
Tracking individual stocks like that is therefore relatively high risk. A company that looks perfectly solid may have a scandal come out or perhaps they invest a ton of money into something that doesn’t pan out. It’s much less risky to invest in a wide variety of stocks. That can take a lot of time and attention, though, and if you want to invest $1000 then you’ll struggle to do so efficiently–with many stocks a single share can be hundreds of dollars, so perhaps you only come away with a small handful of different companies’ stocks.
That’s where mutual funds come in. Investment firms set up a fund with some investment strategy, like “US stocks” or “a 60-40 mix of stocks and bonds.” You can then put $1000 with the investment firm and they’ll add it to a pot with everyone else’s money, then they buy the stocks from there.
As a variant of a traditional mutual fund there are exchange traded funds. This just takes the mutual fund and lists it on the exchange as if it were a stock in and of itself, but buying “shares” of the ETF is functionally the same as putting it in a mutual fund account. This interface is simpler for many people.
Mutual funds come in various flavors. Some profess to make the best investing decisions, getting the highest yields for the lowest risk. For these lofty claims they charge high fees. Often they struggle to outperform the market over the long term, especially once those fees are taken into consideration. Other mutual funds just dump money into a common collection of big companies. The most popular set of companies to invest in is the S&P 500, a list of 500 large US corporations. The weighted average price of these companies is tracked under the stock ticker symbol SPY.
So the statement is “put your money into a mutual fund that tracks the S&P 500, via an ETF listing for simplicity.” It’s the most basic way of “putting money into the stock market” without being exposed to risk of individual stocks too bad. This is, of course, just one of countless investing strategies everyone’s investing needs differ, but that’s at least how to parse what was being said.
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