Top Performing Mutual Funds, the Answer to All Your Woes?

One of the reasons the search engines may be bogged down in Mutual Fund search traffic is that no one can actually find the product that they advertise about themselves.

The UNfounded Hype surrounding Mutual Funds is fantastic, millions and millions of Google searches per month indicate how many people consider this a simple way to quickly diversify, hedge and profit. But is it true? Let’s take a look.

It is widely accepted that “Mutual Funds are a simple way to diversify your assets.” -Don’t kid yourself, most of them are sector driven, in other words, instead of owning some stock in a coal company you own shares in a company that owns stock in ten coal companies. This is hardly diversified.

But then, investing in a massive Mutual fund that owns other smaller ones is the answer, right? No. You are still not diversified. Even the massive ones are not usually international, they are confined to one market or Country. If the market tanks or the Country’s currency tanks, you will feel very inadequately diversified.

“Hedging”, is not another way for the fund to turn a profit, It is a form insurance against losses, and costs the fund profits, if it makes any. If you are only looking to protect your money, bury it. But I thought the goal was profits?

Profits, what profits? Even top performing ones do not usually beat the rate of inflation. Do a search on MSN or Yahoo for “top performing Mutual Funds”.. blech!

The strategy is inherently difficult to produce substantial profits:

* The manager must follow the rules of the fund, imagine Warren Buffet Following rules, instead, Berkshire is just his portfolio, he makes his own rules (as a trader should), and follows them strictly.
* Mutual Funds are “Buy and Hold” structured, which is difficult when the economy or market or market sector is imploding and money is constantly deflating.
* Mutual Funds have fees that have nothing to do with performance. This is a huge factor in the small returns on your investment. You are essentially paying their wages and mortgages before profits are calculated, the fund may have seen a profit before it had to pay it’s own expenses. And now, paid, is showing a loss. Performance fees are the answer, but none work on that basis.

In most mutual funds you have no idea of the manager -what his track record is like, not the fund’s track record, HIS track record. Again, Don’t kid yourself, in any fund you are essentially investing in the manager. He is at the helm. But in this case, the cards are stacked heavily against him, that is why it so miraculous that a few of them make it through a crisis. And rightly so, they become famous and influential.

Now “Hedge Funds” are much better suited to the investor, but they are usually exclusive and require very large deposits.

Basically, they are the answer for high net worth individuals. But again, they have a downside too, they are not liquid in that, you are not buying shares in a fund, you actually own a piece of the pie. Many of the investments they specialize in are creative and illiquid. Like long term Real Estate Ventures. 5 years is a short term investment in a Hedge Fund.

I hope I have helped a little in the riddle of where to put your money. -Look elsewhere.

I do not want to give you answer to the question, “Where do I put my money” Just like I do not want to give you many quotes from respected individuals so you will take my word without inspection. I would much rather you did your own research and came up with your own answers.

Start your research at: http://the88plan.com