I am posting this because a lot of people are invested in mutual funds. Not only are they invested in mutual funds but in mutual funds from local banks. Local banks! Not big companies like Fidelity or Vanguard but from local banks, whose main service is not to provide investment advice but to open checking accounts. This is a consumer exposé.
It seems like everyone has forgotten about the financial crisis of 2009, the recession, the housing bubble. We forgot that houses are correlated to stocks and that stocks are correlated to mutual funds.
In the end, we must ask this question: Do the richest people, like Bill Gates, own mutual funds? The answer is an outstanding No! Gates is invested in corporations, real estate and planes. And the reasons why are explained below.
8 Reasons why you shouldn’t invest in mutual funds
1. You Have Zero Control over the companies the fund invests in. You can’t give your input on what the mutual fund should invest in or get out of, even if you’re a leading expert in a specific industry. You can’t call the CEO of the fund and ask him how the fund is doing. You can’t tell them to move into a cheaper building or to give fewer bonuses to its executives. The wealthy don’t invest in mutual funds for this exact reason because they have no control. As an investor, we want control. But as a mutual fund investor, you are a spectator.
2. The Fund pays Themselves On How Much They Have Under Management NOT On Performance. The fund makes money whether the market goes up or down. Why? Because in their contract that you sign it states that they get paid a percent of the money they manage for you, NOT on the profits they make. Meaning, they have no incentive to make money for you. All that matters is to get money into the fund. So, when the market is going up, they make money. And when the market is going down, they still make money! This is why mutual funds will always tell you to continue your investment even though the market is tanking. Why? Because they want to get paid! Thus, the only person that gets rich when YOU invest in mutual funds is the mutual fund company itself.
3. There Are More Mutual Funds Than Stocks. In 2016, there were 9,511 mutual funds in the U.S. That same year there were, 3,227 stocks listed in NASDAQ and 493 listed in NYSE. That’ means there are 5,791 more mutual funds than companies. In other words, there are 40% more mutual funds! In 2014, there were over 79,000 mutual funds worldwide. Which fund do you choose? How do you pick? You won’t find out here because this is a report on NOT choosing mutual funds as your investment vehicle. Mutual funds are a derivative of stocks and the combinations possible are enormous, you might as well invest in stocks.
Which fund do you choose? How do you pick? Mutual funds are a derivative of stocks and the combinations possible are so enormous, you might as well invest in stocks.
4. The Tax Code Doesn’t Want You To Invest In Mutual Funds. Nor does it want you to invest in stocks or bonds. Why? Because the government penalizes you when you invest in stock, bonds, mutual funds via capital gains. Every time you make money trading stocks, bonds or mutual funds, the government takes 20% if it’s longer than one year or the capital gains are taxed at ordinary income if they are less than 1 year. The government penalizes us. Our own government is telling us not to do it.
5. Hidden Fees. Not only are the fees not based on whether the fund creates a profit for you or not. But, there are hidden fees! If a company is going to hide fees from you, should you really be doing business with them? The problem with fees is if the market isn’t going up fast enough, it will eat up on money invested.
6. The Rich Don’t Invest In Mutual Funds. They Borrow Money From Them. Look at this way, the middle class invests in mutual funds. Now, the fund has assets under management and it has to find a place with the highest return to invest that money so it can pay the customers, us, the profits. This is where the wealthy class comes in. They come to a mutual fund and ask them to invest in their private business for a financial return. The mutual fund takes this return, takes a bit off the top for itself and gives the rest to its client, again us. This is also called arbitrage.
7. Mutual Funds Can Only Buy. A mutual fund can only make money if the stock is going up. It can never make money if a stock is going down. That’s by definition illegal for the fund to do so. If you want a fund to do that, you’ll need to find a hedge fund.
8. Banks Won’t Lend You Money To Invest In Mutual Funds. A bank would never lend you money to invest in mutual funds even though they sell it themselves. Meaning, they won’t lend you money to buy their own product! That’s because a mutual fund can go up or down, and the bank doesn’t want to take that risk. In other words, it’s a risky investment for the bank. If a bank isn’t willing to take that risk, should you?
On the contrary, a bank will lend you money to invest in real estate, like a home. Why? Not because real estate always goes up, but because it’s a good collateral for the bank. It’s tangible. It’s real. It’s physical. They can touch, feel and smell it. Real estate is an asset. Even if the real estate market goes down, it can never go to zero, because it has a construction value. But, a stock and mutual fund can go to zero.
As an investor, you have to get involved, period. Bankers have an agenda. At the end of the day, they come first and you come second. They need to make a profit first and then you, else they’ll go bankrupt. Be intelligent my friends, invest wisely.
If you don’t believe what I’ve said, google the claims. I recommend it because that’s how we get smart. On top of that, read books on investing.
The only reason people invest in a mutual fund is because that’s the only vehicle they know. And, it’s the easiest option: put your money here with a click of the button, sit back and wait. On top of that, they’re sold to us by our friends and family, who they themselves aren’t accredited investors. Or it’s sold by our “banker”, who aren’t actually bankers since they don’t own a bank. They’re just glorified salesmen.
To your success,