How far do you believe what the Mutual Fund Companies

How far do you believe what the Mutual Fund Companies tell You?

When you're dealing with investing in anything, you can't help but get the feeling all the time that you're having the wool pulled over your eyes. All those strange percentages, all that strange jargon, the fact that the stock market has collapsed over and over again how do you know that you can trust the mutual fund companies?

Often, your gut instinct that there is something going on that you don't like is completely justified. There are many ways in which the mutual fund companies do in fact lean towards untruthfulness. Here are a few things to keep in mind when you invest in the products offered by mutual fund companies.

The first myth goes to the very essence of why we choose to invest in mutual funds safety. The mutual fund companies never fail to tell us that they are safer than the stock market, because they are managed by experts. The truth is, they don't perform better. But they don't do worse either. Usually, they do exactly the same as the regular stock market. Anyway, it doesn't make your job any easier to trust a mutual fund because you'll still have to do your research into what mutual fund manager is the best.

A mutual fund isn't a safer place that's insulated from market fluctuations either. Yes, they do try their best by spreading risk across a wide variety of stocks. But you could do that too, instructing your stockbrokers to invest all over the place. You can even learn to do this yourself and save yourself quite a bit. Anyway, the way you define risk and the way they define risk are quite different. A mutual fund company can define "low-risk" in a relative way. They can say that their risk is low in the context of the kind of stocks they are investing in.

Another old saw that they use is about how mutual funds are better because they're actively managed. There's a manager always keeping a beady eye on the investments, looking to find the best time to buy and sell, they tell you. Well, that's actually a hypothetical ability. Only a few mutual fund managers really are capable that way. How do you know which ones they are?

How about the claim that mutual fund companies like to put out that their average annual return is a specific number? Basically, you want to look for compounded return and not a simple percentage. And mutual fund companies have you believing in this simple percentage number. That's completely misleading.

No, we're not suggesting that mutual fund companies are a complete waste of time. Far from it, they are a good way for people to invest when they don't understand the markets at all. But for anyone who is able to take little interest in his investments, they may not be the best out there.

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