What is your openion about investment in mutual Funds?

Question

I heard that the investment in mutual fund is very safe and getting good return. I want to know your openion in this regards. as per your experiance which Mutual Fund is Good.

Answer 1

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

Yes investment in risen mkt is advisable through Mutual funds. when u buy a mutual fund u get exposer to many no of stocks because ur returns are based upon the stocks held by that mutual funds in its portfolio. If u need suggestion in which mutual funds u shd invest then u can go with sunderam select midcap, sbi bluechip fund, tata infrastructure fund, reliance growth as well reliance equity fund, for information log on to www.moneycontrol.com/mutualfunds

Answer 3

They say that 90% of mutual funds UNDERPERFORM index funds. I'd go with an index rather than a mutual fund.

....Actually I'd go with real estate, but that's another subject.

Answer 4

Investing in mutual funds helps you to diversify and lower the investment risk as mutual funds invest over a broad range of securities. You get complete information about the value of your investments and where your money is invested regularly.

Answer 5

Don't ask. Go ahead.

Answer 6

Yes it is a very good idea

Answer 7

if you can not spell...please do not invest.

Answer 8

Actually, the first responder exaggerates a little. The figure of underperforming mutual funds is only about 60% to 70% if you can believe the statistics. But he does have a point that you need to consider. That is that most mutual funds do underperform the market in general, so you must be very selective in picking a mutual fund or set of mutual funds to invest in. It is better to have several than just one. Diversification is the key.

Moringstar rates many funds as to their past performance. Unfortunately, past performance does not predict future performance too well. (personal experience) You can find these ratings on Yahoo finance and screen for mutual funds that have decent ratings. 4 and 5 star.

The great advantage of mutual funds is that they provide the small investor with diversification of investments with a small amount of capital. Some funds much better than others.

Here are the things to look for when selecting a mutual fund.

1. morning star rating (that way most of the drudgery has already been done for you)

2. expense ratio. 1.5% is about average. Index funds have an expense ratio of about 0.5%

3. portfolio turnover. You have to pay taxes on realized capital gains so for tax purposes it is better to invest in a fund that does not churn its holdings. Many churn over 100% a year.

4. investment philosophy. Many funds are sector funds. That is they invest in a particular sector of the market--large cap stocks, small cap stocks, value stocks, growth stocks, foreign stocks, drug stocks, internet stocks, and on and on.

If you select a fund that invests in a particular sector and do not have any other counter balancing funds, you are placing your investments in greater risk than investments in the overall market.

Consequently a diversified approach is to spread investments among various funds with different philosophies.

Say 20% in large cap
20% in small cap
20% in foreign developed markets
10% in debt
10% in developing markets such as China and India
20% in cash equivelents such as t-bills.

Something along those lines.

Personally, I own 7 mutual funds not in equal amounts.

1. small cap mutual fund
2. mid cap mutual fund
3. China stocks mutual fund
4. Swiss stocks mutual fund
5. U S stocks mutual fund mostly large cap stocks
6 foreign government debt mutual fund to provide some protection against the falling dollar
7. U S income stocks mutual fund


Good mutual funds per my experience. Pennsylvania Fund marketed by Royce funds, a good small to mid cap mutual fund.
TDF a closed end fund investing in China. Bruce Fund, a small cap fund that is not rated by Morning Star, too small. But has an outstanding track record. You can find it on the internet. SWZ a closed end fund investing in Swiss stocks. GAM a closed end fund investing in U S stocks mostly large cap.

As I said past performance is not a good predicter of future performance. A fund with a great 5 year track record many do absolutely terrible in the next 5 years. You have to continually monitor how well your funds are performing. If they have two bad back to back years compared to the other funds in their class, it is time to replace them.

Answer 9

What sets this one apart from all the others? Did it beat the Dow last year? No. If it can't beat the index it tracks, does that make it a "good" fund? No.

Let’s look at Investment Company of America (ICA), owned and operated by American Funds (AF). AF is an awesome fund company for a couple of reasons. There are several advantages and disadvantages:

1.AF is a private company which means they only answer to their MF holders. Fidelity is a good company also, but they are owned by stock holders. In the long run the company that only answers to you, the MF holder, is going to look out for your best interests.

2.AF also has some of the lowest annual fees to maintain an account of any MF company. All that being said, depending on your situation ICA may or may not be good for you. You need a competent advisor to help you with that.

3.I would be cautious with ICA as it is one of the largest MF in the world. They may seem like a good thing but it actually can be bad. It means it has much less flexibility to move its money around when conditions warrant it.

4.As far as EJ goes, they hire people on average who have very little experience in the industry, so at a minimum make sure your rep has a lot of experience and didn't just start last month at this. They also have agreements with companies like American Funds where their reps get a bigger commission to them then they do with other products. The concern being your advice from EJ might be tainted by the reps desire to get more commission. You need to work with an independent rep to assist you with you decisions; one who will give you all the information and doesn't have a hidden agenda.

Now let's look at MF's, in general, or the decision to use one at all.

If you invest in a MF, you have turned that responsibility over to someone else. To me, they are mostly the same, in general, in terms of results. Fewer than 10% can beat the Dow or other index it follows because of their fees. Why would you pay someone you don't know, whom will almost certainly underperform the market, an annual fee of 2.5% to do something you can do yourself, and do it better by buying an ETF, without any input from you after the initial purchase? An ETF is a publicly traded “Exchange Traded Fund, that trades just like a stock). Just buy the Diamonds (the DJIA ETF) if you want to let it ride on the Dow, or the Spyders (SPY - the S&P 500 ETF), or the Nasdaq (QQQQ), or diversify across the entire market by buying all three. The ETF's trade just like a stock or MF. If you want to diversify, and you want to Buy and Hold, buy an ETF.

A MF is always "in" the market, so you are at the mercy of the ups and downs of the Dow. You are unable to manage your risk with a MF, so you can't put a Protective Stop on a MF, at say 10%, to lock in your profits when the market goes down. You don't have a clue what's going to happen. That is not my idea of investing.

Actually, if done properly, it is more work to investigate all of the MF's and their advisors and their traders and their fees and their methods, than it is to investigate all the similar applicable info about stocks. To me, it's more like a conscious choice to be ignorant, to simply and blindly turn your money over to a stranger because they are "listed," like you do at a bank. Stocks are "listed," as are commodities and ETF's and everything else. With a mutual fund, you've just added a whole new set of unknowns to the equation.

The best you can do in any investment is try to increase your odds of success and reduce your risk. You can do these things yourself, but not in a mutual fund.

MF's are so 20th Century. Relics of the past. Unneccessary. Buy an ETF. Or sell an ETF short and bet on the downside. There are two sides to every market, not just the upside.