Mutual Fund Investment Strategies

There are many mutual fund investment strategies you can engage in.  Here’s a quick story of how it started.  Then a quick warning about investing in mutual funds.

Ever since Wall Street went to Main Street, there has been a flurry of mutual funds that have come up.  It has been a booming industry.  Selling money management services has been a fountain of wealth for many on Wall Street on the backs of retail investors.

The only thing is that mutual funds have not done well over time.  These so called professional money managers with their fancy investment strategies have not been able to beat the market over time.  It’s not all their fault.

Money managers of mutual funds have enormous pressure on them to beat the market.  I think that is why they rarely do.  Most long term investment strategies require some down years.  It’s just expected.  The point is to perform well over time, which will mean there are some inevitable dips.

For money managers, they don’t have the luxury of letting their funds dip.  They are so obsessed with short term gains, i.e. one-year periods, that they go off track of their investment strategy, which is probably solid at it’s core.  But they have to make their customers happy.  No matter how much long term investing is a high value on Wall Street, it is almost never followed.

So what is an investor to do?  Well, he can find good stocks to invest in himself.  He can also invest in index funds.  These are passively managed funds that track indices.  That means it won’t beat the market, but at least it won’t underperform the market.  The market grows at a decent pace over time anyways, so it’s not a huge loss.

Either way, watch out for mutual funds.  They’re expensive with all of their management fees.  And many of them don’t beat the market anyways.

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