If there's one piece of financial advice that most people agree on it's that individual investors should buy mutual funds.
Because the mutual funds do the work that individual investors don't have the time, skill, or money to do: Figure out which stocks are good and which stocks are bad and invest your money accordingly.
But that's a false promise, says Mark Hebner, who is CEO of a $1.5 billion asset management firm called Index Funds Advisors . The vast majority of mutual funds do worse than index funds. As a result, they cost their investors money--both from high fees and reduced returns.
The fundamental flaw in most mutual funds, Hebner says, is that even well-educated portfolio managers with huge research budgets can't pick winners consistently enough to beat the market over time. Yes, by the luck of the draw, about a third of mutual funds will beat the indices each year. But last year's winners are often this year's losers. When you look at long-term performance, only a Read More »from Most Mutual Funds Are Ripping You Off, Says IFA’s Mark Hebner