Quit Drinking the Mutual Fund Cool Aid

Paul Durso Insight Investing Articles, Insight Investing Video, Retirement, Retirement Planning, Risk Management, Risk Management

The mutual fund has good tasting cool aid, don't they? If you look on their websites, you will typically find great performing funds as a basement bargain low fee. Yet if you look at the statistics of mutual fund managers and their performance you will see that the vast majority of fund managers under-perform the market. You will also notice that the fees they charge are a whole lot lower than the industry standard. Actually, you will find it very difficult to find a mutual fund fee that is posted on their website that is above the industry standard. Now, how is this possible? What are all of these mutual fund companies NOT telling us?

Industry Facts

Before we dig into the mutual funds themselves, I want to shed some light on what it will cost you on average to own a mutual fund, not what mutual funds say their funds cost. The difference is staggering and downright sickening.

A few years back I discovered a great article on this topic from Forbes. It’s called the real cost of owning a mutual fund. You can see that article here. What you will find in that article is that the average mutual fund is costing the investor between 3.17% and 4.17% annually to hold a mutual fund in their portfolio. That is nowhere near what the mutual fund industry is saying on their websites.

Personal Fund [.] Com

In the video you can watch on this page you will see me reference a website called personalfund.com. This website lets you look deep inside mutual funds and the real cost for investors to hold these funds. The truth of the mater is that what mutual fund companies are saying on their website is not at all the whole story of the real costs incurred in holding mutual funds for any extended period of time.

It’s time for investors to stop drinking the cool aid mutual fund companies are selling. Look at the facts and learn what you don’t know about the actual costs of mutual funds. After all, there are very few mutual funds the hold any specific investments that you can’t buy on your own. In other words, you have the power to manage your money the same way they do. However, you don’t have to pay the mutual fund companies any money to do it!

Find a Professional You Can Trust

If most of the mutual fund companies are saying one thing and costing their clients another, how do you know who to trust? Even worse, how can you find someone that can truly help you that charges a fare fee? The first place to start is with a fiduciary. This type of financial advisor has to give advice that is in your best interest. Secondly, make sure that the fiduciary is NOT dually registered. This is very important. You don’t want an advisor that says they are a fiduciary, which can be true, but give advice under their other dually registered platform which is the suitability standard. The suitability stand allows an advisor to give advice that is not in the best interest of the client as long as the advice is suitable. How this type of advice is legal is mind blowing. You want a Fiduciary ONLY advisor.