10 Reasons Why I don’t Buy Mutual FundsSome People love mutual funds, not me. There are 10 reasons why I don’t buy mutual funds in any market. 1. Most Mutual Funds Don’t Beat The Market. 90% of all mutual funds make a lower return than the SPY, which is considered to be the market average. In fact the average mutual fund gives you a return 2% less than the SPY. Yet people buy them to make high returns, how does this make sense? 2. Mutual Funds Don’t Offer Options. If I am going to hold a stock for the long haul that’s Ok, but I want it to be optionable so I can sell calls on it when it is going down. This way I can at least make some monthly income off of them and recoup some of my losses during a bears market. 3. They Don’t Care About My Money. When you buy a mutual fund you don’t buy any securities. You simply hand over your money to someone you hope will do a good job investing it. But the only one who cares about what will happen is you. They do not make money based on how much, or how little they make you. They just make a standard fee, and in many cases they make the same fee if your account goes up as they would if your account goes down. 4. I Want To Cut My Losses When the markets are going up that’s great. But when they turn around, now that’s when you have to worry. I have been hearing stories about people losing 30-50% of their account in mutual funds during a bears market. There is no need for that, if I have a losing trade I want to cut my losses short, and not hold onto them aimlessly hoping that one day it will be worth more than I bought it for. 5. Many Funds Are Over Diversified. Diversifying between a few good quality stocks can be great. Diversifying between 500 random stocks from every sector and economy can be confusing. It also leads to much lower returns because the odds of you finding 500 stocks that are quality stocks and worthwhile to invest in are very low. 6. Management Costs. When you invest in a mutual fund you pay for other people to invest for you. I don’t believe this is worth it, especially considering that 90% of those management teams don’t even beat the market. 7. Other Cost. Mutual funds are a business; they make money by charging you. So you know that they will find some reasons to charge more. They will charge you for the privilege of having your money with them, they may even charge you more if you make money, heck they would charge you for the fact that your money is green if they could. 8. ”Past Performance Does Not Guarantee Future Results”. Past performance is what everyone looks at when deciding which fund to buy. But that does not necessarily guarantee anything. Bulls Markets don’t last forever and when they end the joy ride is over, at least for them. 9. No One Believes Me But Stocks Go Down. It seems like every mutual fund preaches buy a stock and wait for it to go up. Well markets go down too. If you are only playing the upside you will be losing money when stocks do fall. If you are playing both sides you can be making money when stocks fall and when stocks go up. 10. Mutual Funds Sell. What is the number 1 concern of all mutual funds? How to get more people to join? They are not in the business of making the best returns, but they are in the business of selling their fund to as many people as possible. You wouldn’t let a car salesman make your investment decisions for you so why let a mutual fund salesman? What To do instead? Instead of investing in funds how about investing the time to educate yourself. Learn how to trade, learn how people are making great returns and even making a living by trading the stock market. All the information is free on this site so why not take the time to read it? You will never look at the stock market again.
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