Chuzzlewit,
Recently, I've developed somewhat of an interest in NETA, and I dropped in to monitor the discussion. I happened to catch your post on mutual funds, and I thought I would take a moment to second your opinion. I agree wholeheartedly. Individual stocks are the way to go. They are infinitely more rewarding than investing by category.
I think one would find that most broadly-based growth/value fund managers statistically clone their portfolios to the S&P 500 Index. They charge an internal management fee on the average of 1.5 percent of the portfolio value, and, because of their distribution contracts, most turnover their holdings around 150 percent annually---which can create a painful capital gains tax at the year's end. In fact, every year, 9 out of 10 funds underperform the S&P 500. Why? Because they perform approximately in-line with the index, less the fees and expenses.
I could go on . . . suffice to say, mutual funds are for those who don't yet have the wherewithal to diversify into, say, 10 - 15 stocks. For these individuals, a mutual fund is a great concept. However, once one can move beyond the funds, one absolutely should. Otherwise, the mutual fund companies will be making more money because of you, but you won't be making more because of them.
You are a very insightful chap. Best of luck to you!
Kenny
PS If one doesn't have the background to research and analyze companies, one ought to go the index fund route. |
