Criticism of mutual funds

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					   Criticism of mutual funds

   While mutual fund investing has exploded over the past 50 years to become one of the most
   popular forms of investing anywhere, there are still possible pitfalls that you can fall into if
   you’re not careful. Investing is still a risky business, even if everyone is doing it. Here are
   some tips to help you through any problems you might have.

   One common criticism of mutual fund investing is that they don’t have a high enough return
   on their investment and that index funds, which aren’t as popular have historically returned a
   higher investment than the much more popular actively managed mutual funds.

   A second common problem that some have with mutual fund investing is the use of load
   funds. You have probably seen the phrase “no-load mutual fund” in the newspaper or on
   television. The reason the no-load type of fund is preferred is because load funds come
   loaded with fees. These fees can run anywhere between half a percent, all the way up to 8.5
   percent of however much you chose to invest. It’s thought that these fees are a clear conflict
   of interest as they clearly benefit the people making the sale and hurt the person making the
   investment. Load mutual funds are also thought to make your broker recommend funds that
   will maximize his fee, and not your investment portfolio.

   Some investors also point to a perceived conflict of interest in regards to the size of the
   mutual fund. Most companies that manage the mutual fund charge a fee of between half a
   percent up to two and a half percent of the total amount of the funds assets. It’s thought that
   this fee could cause a fund to spend more on advertising than is actually needed so that they
   can get more people to invest in the fund and maximize their fee as much as possible.

   The mutual fund market isn’t immune to scandals, either. In 2003, a scandal involving the
   practice of unethical and dishonest trading practices. Many funds were found to have
   participated in late trading and market trimming, both of which are illegal practices. You
   obviously don’t want to invest in a mutual fund that is engaged in illegal activities.

   Mutual fund investing is gaining in popularity on an almost weekly basis, and a few bad eggs
   in the business won’t ruin it for everyone. However, it is always good advice to enter into any
   kind of investing with your eyes open, and if you feel your mutual fund is behaving
   improperly, there are authorities you can report them to.

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