Mutual funds are a bad idea
The idea of a mutual fund is not bad. Let a professional manage your money in a diversified portfolio. Unfortunately mutual funds rarely match market returns.
Many mutual funds charge either front loads or back loads. A front load, usually at around 5%, means that you will lose 5% of your investment in the fund immediately. If you invest 10,000 dollars into a mutual fund 500 dollars goes into the coffer of the mutual fund guys and now you only have 9,500 dollars to play with.
Back loads are just as bad, when you withdraw your money from the fund they take 5%. Loads should be a crime!
5% might not seem like much but it is if you understand the power of compound interest.
In addition to loads mutual funds charge an average of a 2% fee a year. That means instead of getting a 10% return you get an 8% return, instead of 4% you get 2%… This will kill your long term returns!
With all of these fees you would think that mutual funds offer great returns, they don’t! 80% of mutual funds lose to the market!
If you do not want to worry about investing yourself, buy an index fund. Index fund’s have no fee’s other than a .1% yearly fee which is nominal and your returns will mirror the S&P index.