Why I gave up mutual funds

I recently sold all my mutual funds. I decided that I was wasting a lot of money on them and I wasn't seeing the benefit.

Before I really got interested in the stock market and investing I knew that a mutual fund was basically a collection of stocks that someone manages and keeps you more diversified than buying individual stocks. All I really heard was "diversified" and thought, prefect, that's what everyone always says, stay diversified. That's for me! So that's where I put my money for years....

That is until recently I stumbled upon a site called Personal Capital, I entered in all of my account information and I realized I was paying hundreds of dollars in fees each year for my mutual funds. If my mutual funds stayed the same, I actually lost money on the fees involved.

Everyone these days is talking about ETF's and Index funds. They are similar to mutual funds as they track a certain portion of the market, but their fees are much lower.

I moved all of my mutual funds into a couple of Index funds that track very similar portions of the market and now instead of paying about $300 each year every year, I now pay about $15 in fees. I had heard about index funds and ETF's before and I knew that their management fees where much lower, but I didn't do any research on how much I was wasting. Personal Capital makes it easy to just put in your information and it graphs out exactly how much you are paying in fees each year and how much you waste over the span of 5 or 10 years. Trust me, once you see a real number showing you that you can save thousands of dollars in the span of 5 years without doing anything besides finding a different place to put your money you will be motivated to clean up your accounts.

But mutual funds aren't all bad, they just aren't for me in what I'm trying to use them for. A mutual fund manager will do more research on all of the companies they invest in, whereas an index fun will just pick some of the major companies in a specific area. This might be better for emerging markets, a manager will research the best companies in a different country to invest in whereas an index will probably just pick some of the biggest companies in that market.

Like I said though, right now, mutual funds just aren't for me.

On a side note on Personal Capital, they are a personal wealth tracking company, you can enter your accounts and determine how much you are spending on everything and how much you are making. You can easily see how your investments are performing with easy to read graphs. So they are more than just a tool to monitor your mutual funds, they are a full personal wealth tracker. There are some good things and some bad things with the site and I will probably have a whole post about that later.


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