The more I learn about mutual funds

Tweet

The more I learn about mutual funds, the less I like it. There are a few reasons to invest directly in the stock market, and not buy mutual funds. 1. Management fees The management fees are high, and recurring. You have to pay the management fees even if they are not making money for you. 2. Mandate The mandate of the mutual funds requires them to stay invested. Even when they know that the market crash is imminent, they cannot sell away all the shares, and keep cash. That is against the mandate. That is why the investors of mutual funds lose money. 3. Too big Many mutual funds are too big. They can affect the direction of the market when they buy or sell. That is why they cannot afford to sell everything, and wait for market to crash. 4. Managers are employees The managers are employees, and they may not have a stake in mutual funds that they manage.