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Read This Before You Buy a Mutual Fund

According to the 2014 Investment Company Fact Book, the mutual fund industry in the United States manages an astounding $15 trillion in assets. That represents a whole lot of investors who must be disappointed with the performance of their actively managed mutual funds.

Approximately 85 percent of active large-cap stock funds underperformed their benchmark indexes through Nov. 25, 2014, according to an analysis by Lipper, a division of Thomson Reuters.

The rationale behind purchasing actively managed funds is their purported ability to “beat the markets.” Financial pundits, brokers, insurance companies and many advisors claim they have the ability to identify and select outperforming mutual funds. Making the case for this “expertise” essential, otherwise everyone would simply buy index funds, where you earn the returns of the index, less low fees and assuming no tracking error.

Read the rest of the article at The Huffington Post.

 

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