Are mutual funds a rip-off with all there hidden fees?,?

Answer 1

Overall, yes!!! There are some with fewer fees, but overall, not the best deal.

Mutual funds are appropriate for some and the wrong investment for a growing number of people.

Put another way, I would NOT invest in mutual funds if it weren't for having a 401K.

Overall, Mutual funds are not good (once you're educated) and you should not invest in mutual funds unless you have to (like if it were a requirement in a 401K).

Here's why.

First of all, mutual funds exist to take average person's money.

Second, mutual funds seem to be "happy" just to do better than the S&P index, since that's often the gauge. A monkey, yes monkey, can usually outpick most mutual funds. As was stated over 80% of the mutual funds out there can't even outperform the market. That's VERY SAD!

Third, mutual funds have embedded management fees in their costs. Most of these mgmt fees are 0.5% to 2% annually.

Fourth, most mutual funds exist not to earn you a lot of money, but are more interested in NOT "losing" you lots of money. That way you stay with them and they continue to collect their fees.

Fifth, mutual funds are not as liquid as one might think. If you're in mutual funds and a Bush talks in the morning and you call your broker to sell because the market is now tanking, the broker will gladly take your order, but the order will not be executed until the day is over and the negative impact is already priced into the fund.

Sixth, many mutual funds charge extra "fees" if you buy/sell their fund within a certain amount of time, meaning you must keep your money in the fund 90 days to 2 yrs before you're free from the fees (read the fine print on trying to get a withdrawal). These fees can be up to 3% or so of your money as well.

Seventh, mutual funds have to be in the market. So if the market is crashing or going down like it has between May and now, then the funds still have to be in the market and taking those losses too. With some practice, you can time your monies to avoid some of those losses (it'll take practice).

Convniced yet? Need more?

Eighth, mutual funds have to be pretty diversified and so if there are hot and cold sectors, they are probably in both the hot sectors and cold sectors. However, as an investor, you can buy into just the sectors you want, like metals, or housing, or energy, etc. or right now, Healthcare, Retail, and insurance!

Ninth, mutual funds are so big, they can only invest in certain companies. A small mutual fund with $10 billion in assets. 1% of that money is $100 million. How many companies are this big where $100 million investment isn't the whole company? Do you want to limit yourself to just those larger companies like microsoft, at&t, home depot, cisco, ebay which have been sideways for years? I think not.

A better way would be to buy ETFs (exchange traded funds) or holders. These trade like stocks, so are very liquid, and do not have the fees like the mutual funds. Further, you can buy/sell them as you wish. They represent sectors or indexes, so buying them gives you the same diversification as the sector/industry/index, but without the extra overhead!

See amex.com (american stock exchange) or ishares.com, holders.com for more info.


You need to invest for yourself. If you can't, then sure, use mutual funds. But be aware of the shortcomings (and as you can see, there are many).

Let me know if you have further questions.

Best of luck!

Answer 2

Some ar -- others are not.

Wealthy investors can diversify their portfolios on their own. Those who are not wealthy have a choice -- keep a portfolio that is not well diversified or put their money in a mutual fund that is diversified. Because of the fees, a mutual fund will not offer as good a return as a well diversified portfolio with the same risk level. However, they can still charge fees and outperform nondiversified portfolios of the same risk level. As long as they can do that, there will be a market for their services.

Answer 3

Many aren't at all. Look for no-load funds and check the fees part of the information when looking at the info. Vanguard, Magellen, T. Roe Price, and others have good funds with some comparatively low costs. Try the Exchange Traded Funds (ETF), you could buy the Dow Jones Industrials with Diamonds (DIA) or the Standard & Poors with Spydrs. That is about as cheap as you can invest and get the diversity of solid companies. There are more, check out Ishares.

Answer 4

You right! I think it is a kind of scam. You pay more fee than you earn. You might made some money before with mutual funds, but not anymore since stock market is not rising as it used to be. I think that I just wasted all my money in the 401K. All 401k plan is with mutual funds, and I think that it is a kind of scam and we were not told about the real truth. We as middle class people are dedicating ourself for the big and rich guys.

Thanks,
M. Chowdhury
www.amreteckpharma.com

Answer 5

Exchange traded funds (check ishares.com) have extremely low fees. Most are in the neighborhood of .1%. That's only $1 per $1000 you have invested.

Because of their low fees, they can beat the performance of a large majority of mutual funds.

Answer 6

not necessarily. There are quite a few decent mutual funds to pick from. They provide broad diversification with just a small investment. Like all other investments, there are good ones and not so good ones. There are many sites that allow you to compare mutual funds, including their expenses. Yahoo finance has such a screener.

Answer 7

There are no hidden fees. All fees are outlined in your prospectus. Try reading it.

Answer 8

fees are explained in the prospectus. if you don't like the fees, try investing in stocks on your own.

Answer 9

Better read what it is given you to sign...