what are mutual fund drawbacks

What Are Mutual Fund Drawbacks

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We have gone through the benefits of mutual funds, but what the drawbacks? Before making the decision in any investment, you need to know the pros and cons of the investment you will take, and mutual funds are no exception. You have to know whether this style of investment is suitable to meet your financial needs now and in the future. Read a little bit of enlightening information on the downside of investing in mutual funds.


1) Investment returns are low. You can make a comfortable retirement by investing in mutual funds, but you will not have the swift and bold flips, and swing which you may experience in the sales of certain high yeild stocks. The fact is mutual funds are the slow but steady winning sorts of investing methods, which are effective in their own right to provide comfort living but will never bring copious amounts of wealth.


2) Dubiuos management. Of all mutual funds, it may not neccesary that you need to check the fund manager out thoroughly before buying into the fund. You will never really know whom to trust in this day and age, and many people have complained that they would have done better making the decisions on their own rather than relying on the fund manager to do so. Of course, you can make your decisions but you still have other worries at all times. Profressional management can be a benefit or a downside which is depending on the fund manager you get for your fund.


3) Too much a good thing may not be really good. The problem with mutual funds is that funds those are doing well and netting high returns for investors are often quickly in undated with new investors wanting the same results. There is only so much the manager can do to make good money that has been invested. Another issue is the fact that funds purchase such a small portion of so many stocks, and when one or a handful of the companies that the fund is invested in do extremely well, the pool sharing the profits is so large that the impact is often negligible.


4) The big killer for many investors is sometimes the fund manager takes actions that are right for the fund and those actions may not be what is the best for your individual situatuion. A broker or finanical planner that you deal with personally is much more making financial decisions for you to suit your needs and not the needs of a group. If you want individual advice and guidance, mutual fund is not your piece of pie. You should also avoid them if you are in a precarious situation when it comes to things like capital gains taxes, which can significantly impact your actual profits.


5) Personal control. Are you a control freak? Many of us are. When you go with a mutual fund, you are giving someone else control of something. No one likes being control at another person mercy especially putting your retirement, your vacation home, or your children education in someone else hands. This is quite a scaring situation for someone who is typically control of these investment decisions.


It really doesn't matter whether or not you ultimately decide to include mutual funds in your investment portfolio. Make sure that when the time is right you can make an informed decision one way or the other.


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what are mutual fund drawbacks

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