Mutual funds....are they worth the money?

AlfredSokol said: "I found an interesting statistic. It said that on average mutual funds have return 2% less than they general stock market in returns in the last 20 years. That would mean that you are better off throwing stocks at a business section to pick stocks than have a professional manage the money. What would explain a trend like this?"

travllr said: "It would appear WORSE than you've stated . . . 4/17/2005 2:49 (Memorable Analysis) Over the past 20 years, the average investor in mutual funds that held stocks earned almost nothing once inflation was taken into account, even though stocks enjoyed terrific gains. [url]http://www.investing-news.com/artman/publish/article_753.shtml[/url] trav"

mskern77 said: "That is why I would recommend indexing (low expenses). If you want to make sure that you get a hold of the market gains, and unfortuantely losses over time. Follow the S&P 500 index. I would recomend getting in SPDRS the ETF index that follows the index. If you are over weighted in one area of the market, say technology, you could buy the sector SPDRS that cover every other major sector in the market, this way you can avoid the overlap in Technology if you are all ready exposed in this area. Anyways, just my 2 cents"

fkheng said: "wouldn't mutual funds, whether indexing or etfs, yield below par returns in a secular bear market?"

lalasushi said: "Transaction costs of mutual funds take away from 1%-2% of your annual return. This severely limits your return in the long run. Basically mutual funds make you work longer if you plan on making your main source of retirement funds come from the mutual funds. I forget the specific number but for say z investment over x years, y years are added to your required working years to reach your goal in comparison to a diversified common stock portfolio. also, a diversified common stock portfolio has returned 7-9% per annum average over the past 200 years, a 2% loss cuts up to 25% of your returns, plus annual compounding, that is ALOT of lost money. +it is nearly impossible to weed out bad fund managers unless they do exceptionally bad because of the luck factor involved in mutual fund management."

HappyHarry said: "Something else shocking is that almost no mutual fund managers even beat the stock market average return, despite being very well compensated. The fact is, mutual funds have a lot of regulations that make it tough for them to constantly make more money. That's why hedge funds have been getting so popular, but they are inherently less safe than mutual funds because of those lack of safeguards."

IntelligentInvestor said: "Are mutual funds usually managed by just one manager or more than one?? But I would assume they would have a lot of analysts working for them in terms of collecting data and stuff, and writing news reports regarding companies... It sounds impossible for a fund manager to keep tabs on the hundreds of companies in their portfolios, while still maintaining an outlook for thousands of potential companies....."

alhamid said: "yes, they usually have a big staff. there is one or two main guys who manage a staff of analysts. thats what the transactions fees or for. so they have a lot of research"

Darren said: "mutual funds are usually a whole lotta hype...their returns are not that great and the charge too much money"

IntelligentInvestor said: "Ya, but I would still recommend it for people who want to invest their money in the stock market but don't have the time or the determination to do thier own research. But all in all, an index fund is better IMO, since like 75% of mutual funds underperform the index.. There's only a 1 in 4 chance that you'll pick one of them, and low expenses are obviously key..."

AlfredSokol said: "I've had them before and trade them in. I had a Russian fund that did real well for awhile."

Vesuve said: "[QUOTE=AlfredSokol]I found an interesting statistic. It said that on average mutual funds have return 2% less than they general stock market in returns in the last 20 years. That would mean that you are better off throwing stocks at a business section to pick stocks than have a professional manage the money. What would explain a trend like this?[/QUOTE] After years of buying into mutual funds, I've realized that most mutual funds are mediocre. There are over 12,000 mutual funds out there today. Most don't do well."