Skip to comments.Mutual funds are hazardous to your wealth
Posted on 02/16/2009 7:17:04 AM PST by george76
Most investors sustained serious damage to their wealth last year -- damage that, in many cases, will be difficult to recover from. Certainly Wall Street titans, reckless lenders and irresponsible home buyers all deserve their share of the blame.
But one part of the financial world has not received much scrutiny for its role in the evaporation of investor wealth, and that is the mutual fund industry.
Sadly, a gullible public has bought into the idea that steady investments in mutual funds, regardless of market conditions, is the way to make their financial dreams come true.
This is one of the biggest fallacies of investing, and why mutual funds are hazardous to your wealth.
To give you a sense of just how flawed the buy-and-hold philosophy advocated by the mutual fund industry was in 2008, just look at the numbers. According to the mutual fund industry's own Investment Company Institute, investors lost almost $3.7 trillion in mutual funds in 2008.
Yet how often do you read about mutual funds leading the public down a losing path? How often do you hear about a fund manager whose performance was drastically lower than the benchmark?
My problems with mutual funds don't stop merely at poor performance or inept fund managers. There are serious problems with mutual funds that have more to do with the design and structure of these investment vehicles.
Advocating buy-and-hold investing is the backbone thesis of most mutual funds. A fund company will never tell you to move to cash when things get tough because it's just not in their best interest. Because most mutual funds must stay fully invested all the time, their concern for managing risk is secondary to their concern for keeping you fully invested.
(Excerpt) Read more at marketwatch.com ...
Mutual fund companies have one primary objective: to make a profit. Unfortunately, this profit is not for you, but for them.
All invested, all the time
For year I've seached in vain for a mutual company that consistantly lost money. I wanted to invest there, but sadly, as soon as I found a loser they seemed to just go out of business.
Sounds familiar, doesn’t it? Read it later after some additional Freeper commentary has arrived. /deja vu selfping
...and? I should hope they want to make a profit. I've been with Vanguard for years. I think they're excellent. Did my 401k go down? Well obviously. Is it worse than if I had spent half my life resaerching and buying bits of stock here and there? No.
Mutual fund managers are mostly driven by fads and the latest analyst rankings. Most of this stuff is backward-looking and momentum driven.
If you look at what is out of favor, think for yourself, and read the financial statements, you can do better. Many savvy individual long-term investors lost less than the mutual funds because they avoid some of the frothier stocks.
You don’t have a lot of choices with employer funded 401A’s or employer matched 401K’s. We have money in both, but haven’t lost any, yet, because we moved funds to their only “stable fund” offering a few months before the crash. But all the other offerings seem to be mutuals, and we did have our funds diversified among the different funds, so in the past, we have gained, but rarely lost.
There is an assault on the idea of steady diverse investment in the market, even though historically that is the absolute best investment anyone can make.
They are trying to destroy faith in the markets so they can take over 401K’s and the rest of the economy.
It’s so disgustingly obvious because they are preying upon people during a cyclical downturn. The facts are that people should invest in this market and that they are trying to scare you into accepting maybe 3% from the government or even losing money as in socioal security, in return for giving up the much larger gains to be had in teh market over time.
It’s rather obvious that if the market is to ever recover, investors will make a huge profit with whatever they invest during the downturn.
there are new funds that move to cash when the market
is falling apart. They do it for you.
Devise a diversified and comfortable asset allocation. Write an IPS and follow it. Rebalance periodically. Invest regularly. Stay the course.
That’s what I’m doing, anyway.
About 5 years ago, with our Fido IRAs, we got out all but two mutual funds and went to ETF’s with sell loss limit orders if the market came down.
The ETF’s can be sold like Stock anytime when the market is open, none of this, bs of waiting until the end of the business day. All so they can be bought anytime of the day.
The buy and hold a mutual fund forever has to be one of the biggest lies ever foisted on Americans, right in with Republicans are racists/liberals aren’t, Liberals aren’t fascists, and top investment officers/bankers are Republicans.
Besides not being able to buy and sell a mutual fund like a share of stock there are the following problems:
1. Many fund managers and some companies are covert lefties and buy stock of lefty loser companies like the Ny Slimes, Chicago Tribune, Compost, CBS, Fannie and Ginnie. They use the hard earned money of their share holders to keep the lefty loser companies afloat.
2. So many of the mutual fund companiers apparently force their reasonably good fund managers to buy large amounts of share of their loser mutual funds. Many of the so called target retirement year funds are nothing but losers with some S&P 500 or Dow investments.
3. Then so many funds charge a fee to buy their shares, high expense fees and other bs fees that cut into any possible profit. Then you can’t sell these funds for specific time periods after your buy them without penalties. ETF funds have none of these problems. Their expenses are out in the open and much lower than mutual funds.
We have our two IRA’s with Fidelity with No/Zero Fidelity funds with exception of their core money funds. We own CDs and corporate notes that Fido arranges for us to buy at no cost. Our ETF’s are GLD, SLV, SHY, THO, TLH.
I have a Mutual Fund that lost about 40% in the last year.
I ended up with just $32,000.
I started the fund in 1984 with $5,000 and never added to or subtracted from it.
Down 40%, but still up 6X. It’s an index fund.
Buy and hold works for me!
For later reading.
ETF’s are my number one choice for investing.
I gave up an mutual funds due to the lack of transparency, 100% stock all the time and lake of liquidity(no daily market).
There is only one thing worse than a Mutual fund..and that is one you pay and up front fee to get into.
Of course not. An entity unto itself wants YOU in the game. Your exposure (IN or OUT) should be determined by YOU. If your 401k does not offer a vehicle to park your money "safely" when and if you want, then you may be roadkill in the stampede out of Dodge.
In rare occasions it's smart to take the penalties, rather than get pounded into oblivion.
Mutual funds are no different than any other investment. You invest your money and assume the risk. The people that manage the funds get paid for their work (horror of horrors!!!).
The people screaming about 401K losses apparently were sheltered from any sort of harm for their entire lives, and think life is cotton candy and pink unicorns. What a bunch of entitled pansies.
I’d like to find a fund that sells when the market is giddy with optimism and buys when folks are jumping out of windows. Selling when the market is falling apart is a great way to lock in losses, in my opinion.
I think that within the next six to twelve months there are going to be some real bargains to be had.
The time to sell was about two years ago.
I’m 70 and my bride will be 69 in a few months.
We are a little too old to ride out recessions, so a very large percent of our IRA’s is in CD’s and a couple of Corporate Notes.
When we are in a boom, people fail to recognize what you point out and I have about their mutual funds.
Even in down times like now, they fail to really look at how their mutual funds have done.
We just got a 2008 summary of Fido Mutual funds, with the exception of a few bond funds, they all had heavy losses last year.
My wife’s 401 K was/is with John Hancock and their choices had terrible results. We got her out of those funds in July/Aug 2007 and rolled them into their money fund. That fund charges a very high expense rate and had minimal return. We rolled about 98% of that K into her Fido IRA this Novemberf and invested it in CDs and the ETF’s I mentioned in my earlier reply.
The time to buy is coming ~ but it's not here yet. Odds are good you have your money tied up insome vehicle that your suddenly insolvent and bankrupt brokerage is not going to be able to get their hands on to do the investment for you.
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