Comments on: 8 Reasons Why Mutual Funds Make For Lousy Investments

By: Flimjo

Flimjo — Mon, 05 May 2008 17:17:25 +0000

Kat, a word on “no brainer” investing and financial “professionals”: They don’t know everything, and they often are salesmen as well. This has to be the only system where Wall Street executives who get driven to work entrust their money to financial advisors who take the subway to work. Pick and choose your advisors carefully. They’re not perfect, and they make a lot of mistakes.

Also, index funds do have fees, yes, but those fees are miniscule when compared to mutual funds.

Flimjos last blog post..Pack a Lunch, and Save $1,000 Per Year

By: Flimjo

Flimjo — Mon, 05 May 2008 17:11:37 +0000

John, with the term “predictable,” I’m saying that, with index funds, you know where they’re going because they reflect the market. Mutual funds pick and choose their holdings and don’t reflect the market as well. Thus, if the market goes down, you don’t know how far down your own mutual fund might go. With an index fund, however, you know how far it will drop.

Flimjos last blog post..Pack a Lunch, and Save $1,000 Per Year

By: Flimjo

Flimjo — Mon, 05 May 2008 17:09:36 +0000

Joe, I agree with your points, especially the one about how well-managed funds can outperform index funds. That's true. Consider, for example, Robert Rodriguez's two funds. But those funds are hard to fund, and it takes a lot of research to find them. The average passive investor doesn't have that time, and that's why I argue that mutual funds aren't a good choice for them. Flimjos last blog post..Pack a Lunch, and Save $1,000 Per Year

By: Flimjo

Flimjo — Mon, 05 May 2008 03:16:27 +0000

Jim, thanks for getting this post up! Appreciate it.

Flimjos last blog post..The Flimjo Recap – May 4, 2008

By: ~Kat~

~Kat~ — Fri, 02 May 2008 18:01:50 +0000

Good post but I have to disagree. You have to look at WHY you are buying into a mutual fund. I like mutual funds for my “no brainer” investing. In my mind I am paying a professional to manage my money for me. I just choose a good fund and forget about it. With an index fund you still have fees, but the fund adviser MUST stick with the index, even if there are bad stocks there.
I also don’t think the market is a competition. While it would be nice to “beat the market” for most people and most funds that is just not going to happen.

~Kat~s last blog post..Tax Freedom Day

By: Jim

Jim — Fri, 02 May 2008 14:18:56 +0000

Thanks John, I agree with your complaint… just keep in mind that this is a guest post for all intensive purposes. I actually help run a mutual fund, so this post is kind of a slap in the face . Regardless, there are some good points.

Personally, I think I’d rather be in an ETF than either an index or a mutual

By: John Forman

John Forman — Fri, 02 May 2008 13:42:07 +0000

You’re really using “Mutual Funds are unpredictable.” as a reason not to put your money in them? The implication is that the markets (as represented by the indices) are. If so, tell me how. I’d love to know!

I’m not arguing that index investing isn’t the best approach for passive investors. I just don’t like the use of predictable in regards to the market.

John Formans last blog post..One of the Greatest Stories You Will Ever Hear

By: Joe Fission

Joe Fission — Fri, 02 May 2008 12:32:08 +0000

I agree with this to an extent, but there are a few caveats: 1) *good* actively managed funds outperform index funds in sideways or downward trending markets (of course, odds are that you won’t choose one of the good ones); 2) index funds aren’t the best option for all markets, e.g. I don’t think I would ever invest in a global index fund, though indexes are clearly the best option for most U.S. markets; 3) some specialty mutual funds can’t be replaced by an index, e.g. an income fund comprised of only common stocks.

Good stuff. You cover a lot of territory on this blog!