29 Aug

Mutual Funds Suck!

I hate mutual funds. Check this out:

Out of almost 2,100 diversified retail U.S. stock mutual funds that are open to new investors, just 17 have positive returns for both the past 12 months and year-to-date, according to investment researcher Morningstar Inc.

Less than 1% of mutual funds are in the black for the last 12 months. How is that possible with “professionals” running them?

2 thoughts on “Mutual Funds Suck!

  1. Tracy, the reality is that unlike other professions like say accounting, where the facts are immutable, any financial planning that goes beyond government bonds and seeks to balance risk and return is, at best, a bunch of monkeys with dartboards.

    In my opinon two of the best books to help inform your thinking on the subject are Taleb’s Fooled By Randomness and Gary Weiss’ Wall Street Versus America.

    My personal feeling is, as a business owner, I would never delegate my decision making to someone else, so why should I trust a bunch of overpaid dart-throwing-monkeys with my money, hence the value of a self-directed brokerage account. I can’t say I’m 100% satisfied with my portfolio in the current market, but a) I’m not broke, and b) given the facts you reference, who’s to say a so-called professional would do any better?

  2. I appreciate your comments, Lee!

    It just makes no intuitive sense: These guys are paid handsomely to lose money for us? I’m no expert stock trader, but I’ve done far better in my self-directed accounts than I have in mutual funds.

    Mutual funds are good in theory: They help the average Joe diversify and manage risk. But it seems there’s way too much downside in mutual funds, which is exactly what they were supposed to be a cure for!

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