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Is Investing in Mutual Funds Worth it?

Mutual funds allow people to have professionals manage their money for them in the stock market. But is it really worth investing your money into one of these companies? Are mutual funds really the best place to put your hard earned money?

Before we get into that, how do mutual funds actually work? Mutual funds are basically large companies that take all of the money that is invested into them and invest it into stocks and bonds that they think will go up in the near future.

Anyone can buy mutual funds and have their money managed by professionals. There is only one problem with this. These fund charge fees.

A mutual fund may charge a 1-2% fee for managing your money. And on top of this they will normally have hidden fees such as transaction fees or fees just to get into the fund to begin with. That may seem pretty insignificant, but when you see that they charge these fees just to make the 6-10% profit they make every year it is obvious that there are some problems here.

Are they worth the fees? With Mutual fund expenses at such high prices and the fact that most funds do not beat the market there is true that a lot of them are really not worth the investment. There are just too many other alternatives out there that can be both more profitable and less expensive.

However that is not the case for every mutual fund out there. Top funds may actually be worth it. If the fund is making enough money on average to justify their cost then yes, investing into that fund can be worth it.

But that is provided it is able to consistently make large returns year after year consistently. If they aren’t able to do that, then why invest into them? There are plenty of ways to invest your money that come with less fees and can be more profitable in the long term. Like for example a strong ETF.

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