Even ones that appear to have great performance are a scam. The game they play is, the fund company starts, say, 20 funds. A few years later most have underperformed the market but a few have (randomly) outperformed. They then kill off all the funds that underperform leaving only the few that randomly outperformed the market for several years in a row.

Then if you look at their results they appear to have nothing but winners. In fact they are only showing you the winners, the losers are long gone.

You might say, “well if the fund outperformed several years in a row then it will probably keep outpeforming because the managers are better.” But academic studies have proven that even a fund that outperforms, say, 4 years in a row is no more likely to outperform the market the following year. And the amount of experience the managers have also bears no relationship to whether it will perform well. The fact is, over several years time horizon almost all funds underperform, and if you look over long enough horizons the vast majority (99%) underperform, and there is no way to figure out which ones are the 1% that will keep outperforming because it’s basically random.

In addition, over long periods of time the fees eat up most of the market growth. Do the math and figure out how much $1000 is worth in 30 years, first at a 11.5% growth rate, then at a 10% growth rate. Pretty shocking how that 1.5% fee adds up. And because studies have overwhelmingly shown that there is absolutely no benefit for the “management” you are buying with those fees, that’s money that is totally wasted.

All mutual funds are scams except a few index funds that have ultra-low fees, but even with those you’re better off trading ETFs. Just buy SPY or MDY EFTs if you want large or midcap. For bonds just buy some treasuries yourself, you can buy direct using Treasury direct for zero fees, or buy through your broker for a little extra convenience. Never, ever, buy a mutual fund.

Both fund managers and stock brokers front run their customer whenever they have the chance. Fund managers cut all kinds of deals with outside scam artists to jack up the price of the stocks they already own. The concept is like this, they are given a discounted price to buy a considerable amount of ABC stock, or given a certain amount of ABC stocks. Their side of the deal are to buy ABC stocks in the market with the funds under management. This money made from this kind of deals are way more than their salaries.

The concept of mutual fund is like betting on both big and small in a casino table. And they charge you commission fee for placing a bet, lol. Your money will in theory decrease. However, due to the expansion of the money supply, your investment in number term will invariably (unless you have really bad luck) increase. But I doubt very much if your buying power will increase in the long run.

If you can tell that the market is exactly the same as the casino, you have finally put all you learn together.

Cheers;
Lulu

So you made some money with mutual funds and it paid for your college. Great! Now think of how much more money you could have made if you were smart.

Enjoy your job.