Is Your Money Safe When You Invest? | The Informed Investor 10

Episode 10: When you invest, where does the money go?

While investors may be comfortable putting their money in vehicles like mutual funds and ETFs, they may be unclear or confused about what happens to their money once it's invested.

A fund's structure is governed by law, and the regulatory and legal requirements applicable to mutual funds and exchange-traded funds (ETFs) encourage clearly defined governance, transparency, and accountability.

All of that means your money follows a specified path when you invest it, and that path has built-in protections to limit the risk of conflicts of interest, malfeasance, or fraud.

Those protections include transparency, access to information, regulatory oversight, and sufficient checks and balances.

Major players in this system include independent boards of directors, fund custodians, transfer agents, and auditors, all of whom are separate from the fund and fund manager.

The key law governing mutual funds and ETFs in the US is the Investment Company Act of 1940, often referred to as the 40 Act. Administered by the Securities and Exchange Commission (SEC), the law was passed in the wake of the stock market crash of 1929 and the Great Depression.

Beyond being protected by a fund's structure and industry and government regulations, investors can help themselves by maintaining some healthy skepticism about any investment. So if it sounds too good to be true …

In Episode 10 of "The Informed Investor," Dimensional's Mark Gochnour, Head of Global Client Services, Stephanie Hui, Head of Responsible Investment and Senior Public Policy Strategist, and Jake DeKinder, Head of Client Communications, take a close look at the formal rules that protect investors and their money.

LINKS FROM TODAY'S EPISODE:

The Informed Investor on YouTube https://www.youtube.com/playlist?list=PLCyJr6FFig-h1mA7rVP7Mbk0irFw2wA90

Mark Gochnour on LinkedIn https://www.linkedin.com/in/mark-gochnour-9a23598a/

Stephanie Hui on LinkedIn https://www.linkedin.com/in/stephaniedhui/

Jake DeKinder on LinkedIn https://www.linkedin.com/in/jake-dekinder-cfa-4105b98/

Learn more at https://www.dimensional.com/