Below is a link to an article in Smart Money magazine. The article contends that as mutual fund asset sizes grow, the ability of the fund’s managers to outperform the market becomes tenuous. The debate as to whether mutual funds are a better vehicle than ETFs aside, the article does present some very interesting data to support its premise. This conclusion applies to both equity and bond funds.
To quote from the article, “But perhaps the most intriguing problem megafunds face, some critics say, is that as they grow, the link between their revenue and their performance can become more tenuous — leaving them with less incentive to excel for their shareholders. More than 70 percent of rival funds beat the 2011 performance of the Growth Fund of America.”
Just a hint of caution, keep in mind the size of the fund, among many other issues to consider.
Mutual funds are an affordable way for an unrieonmfd investor to diversify their investments to minimize risk. They are good in the respect that it allows you to probably not lose all your money if one or two companies go bad.On the other hand, they often have many charges incurred along with them for upkeep or maintenance and things like that. And often, the funds that have the highest amount of charges because they have the most active management often don’t show any better performance than a fund with little charges/activity.In the end though, mutual funds often don’t even beat the market performance, and returns can be harder to figure out on a daily basis. If you want to be able to see how you’re doing easily and up to the minute, consider an index fund which contains weighted pieces of a number of large stocks (like a NASDAQ or DOW index fund).On the plus side though, you can get money mutual funds from which you can write checks or even make interact payments, so basically operate like a bank account with higher interest.
A mutual fund is a basekt of stocks, bonds, options, or commodities that spreads your risk around so that you don’t lose all your money on one particular investment vehicle.The money is pooled together and a firm runs the fund. The upsides are that you don’t have just one stock that will break you. So diversification and professional management are your positives.The downside is that mutual funds are sorta slow to make money from. They go up very little over the year in my opinion. If you do want a fund, make sure it is a NO LOAD fund. Another downside is that if a mutual fund goes down in a year, it takes so much time for it to turn around and actually make you money. Check out the Vice Fund (VICEX). They invest in companies that sell vices, such as cigaretts, gambling, alcohol. An easier investment would be a Certificate of Deposit (CD) from a bank. They yield 6% a year right now. Go to your local bank and set one up. You’ll be glad you did because it is guaranteed money.