Mutual Fund Investors Are Stunned When They Learn About These Mutual Fund Misconceptions
During the last five decades, the mutual fund/ financial media market has progressed to be a monster, standing at 8.3 percent (or just about $1.3 trillion) of U.S. gross domestic product.
There is presently about $13 trillion of investor’s cash under control by the mutual fund industry. In order for this engine to function, it calls for our money. Because of this, we have been conditioned to accept various “truths” relating to the markets.
Misconception #1: “Mutual Funds Are The Safest Way For The Individual Investor To Be In The Market.”
The sad thing is, these “truths” are in reality mutual fund fabrications, and they are executed, by design, to serve their own industry and certainly not us.
Mutual Funds are, undoubtedly, the highest risk, least return, hands-off option of investing in the stock markets.
Their sketchy mathematic calculations produce a fascinating case, but:
The real truth is scary.
The thought of safety by diversification is a solid idea, but at what costs?
What mutual fund companies don’t indicate is, that in actuality, it will be 3% -4.5 % per year.
The kicker is this:
It’s not 4.5% of your profits; it’s 4.5% of your entire account, and that’s even if you lose money that year!
Your “money market consultants” will advise you that you will pay out only 1% -2% per year to have your money “professionally” managed.
MER’s, redemption fees, 12b-1 fees, contingent deferred sales charges, front-loads, level-loads, back-loads, the lineup of fees continue.
Furthermore, several of these costs are one-time expenses that are not even featured in the mutual fund’s reported expense ratio!
Then, it gets even worse!
Misconception #2: “To Make Money In the Stock Market, You Have Mutual Fund Managers Find You The Good Companies. Then You Buy And Hold It For The Long-Term.”
Dalbar, Inc. shows us “from 1991 to 2012 the S&P 500 Index averaged a 7.8 % increase per year”. They proceed to point out, “The conventional mutual fund investor, within the very same time frame, earned a yield of only 3.5 % per year”. The other 4.3 % of your return went straight to the mutual fund industry in the form of administration costs, loads, and commissions. You’ve wound up handing over them around 60 % of your returns!
Now, here is the worst aspect!
Inflation from 1991 through 2012 evened out 3.26 % per year. This shows that the effective yield for the common mutual fund investor for that 22-year time period is less than .25 % per year.
OK, so that everybody grasps the severity of the issue, that represents one-quarter of one percent!
So as opposed to an effective return of 4.54 % (market return 7.8 %– inflation 3.26 %=4.54 %), at.25 %, the typical mutual fund investor has given over 94 % of their effective gain to the financial machine and inflation.
That is how come the majority of investors are the very same values financially as they were 15 years back!
The risk-to-reward element is unreasonable.
The only one who gains is the mutual fund business.
What good is running the risk of your money in the market for a. 25 % profit? None! You can easily gain that in a savings account.
The cost-to-benefit association is ridiculous.
This cannot be further from the naked truth!
The unmanaged index funds and ETFs have outperformed managed mutual funds each year for the previous 20 years! The Motley Fool explains that “99.6 % of mutual funds don’t even match or beat their index”.
Tell me, what would take place if everyone grasped that “buy and hold” mutual funds does not work and has not worked in 20 years?
What would develop if everybody knew that making money in the stock market has absolutely nothing to do with owning good or bad companies? It might mean that CNBC is no more than “Stock Market Recreation”!
And, what would occur if everyone understood that the mutual fund companies were working with their money to make short-term returns with their own trading systems and not distributing any of it?
Just why do you think mutual fund companies like you to buy and hold?.
What would occur if everybody found out that their “mutual fund consultants” are not much more than financial product salespeople who don’t know any more about making money than they do?
What would come about if the masses recognized the truth?
$1.3 trillion per year marketplace would go down in blazing flames.
Another important thing to understand is that our mutual fund organizations are devoting millions of dollars to political campaign payments and lobbying! Not to protect you, but to try to keep people from discovering what they are really up to.
Pending legislation relating to financial services regulatory reform is being battled from all corners through the mutual fund industry.
They do not wish to be pushed, by law, to reveal to you the truth!
The mutual fund industry wants you to accept that the stock market is this significantly, technical, complex, overwhelming system that is way too much for your feeble mind to embrace.
They will explain to you that to maneuver it effectively you need their services, at the bargain basement price of 60% of your gains!
They do many things in their capacity to try to keep you overwhelmed. Have you ever attempted to read a mutual fund prospectus?
Are you fed up with your mutual funds yet?
Keep in mind; there is no one-size-fits-all strategy that is a match for everybody! But, the investor with a reduced risk tolerance or who is 10-15 years from retirement, more often than not, needs to preserve their cash with low-risk or no-risk investments.
As a result, these statistics start to make vehicles such as investment-grade life insurance or fixed-rate annuities, that are both offered by Lisa Faina Insurance Agency much more attractive. Call Lisa Faina to learn more.