Check out this unique and powerful tool that for the first time allows you to comparison shop between nearly 14,000 mutual funds and their competitive ETFs. Those who have used this tool are seeing what we’ve been trying very hard to expose — mutual funds are 6 – 10 times more expensive than our recommended ETFs.
If you haven’t sold your actively managed mutual funds, then at least look at what you are paying for them. You’ll get a free customized report comparing your mutual funds to ETFs in seconds. Here is the link: Mutual Fund Fee Analyzer. Pass it along to friends and family you care about.
Once you find out how expensive your funds are, you might say: “I have good mutual fund managers. They do beat the market.” You are missing the point – it’s not the fund, it’s the portfolio. As Rick Ferri says in last week’s Forbes article, “we buy a portfolio of five or more funds. Accordingly, the right question that investors should ask is this: What is the best portfolio approach?” He then proves that the chances of a portfolio of mutual funds beating the market are close to 0% over a long time horizon.
“The more active funds you own, the smaller the chance you’ll beat an all index fund portfolio. A portfolio composed of five actively managed funds had a 32% probability of beating an all index fund portfolio over one year, 18% over five years, 11% over 10 years and just 3% over 25 years.”
Next you owe it to yourself to ask: Who’s really in charge of your mutual fund? How are important decisions made? Read this recent Wall Street Journal article that addresses those questions. “When mutual-fund investors think about who’s responsible for the performance-or underperformance-of their shares, they usually tag the fund manager. In doing so, though, investors too often ignore the people who ultimately oversee their funds: the fund trustees. The trustees have a legal responsibility to evaluate the performance of fund managers, the power to hire and fire them, and the authority to set the fund’s fees as well.”
So now, after knowing what you know, consider looking at ETFs. A must read is Tools To Help Pick ETFs. “Exchange-traded funds have become increasingly viable as core ingredients of a diversified portfolio. Originally pitched as low-cost alternatives to stock index funds, ETFs are now available for almost every asset class. But with more than 800 ETFs on the market, choosing which funds to buy has become more difficult. Some online services from brokerage firms and others can help with both tasks…”
Hopefully, after using the mutual fund fee analyzer and reading these articles you’ll finally be convinced to sell every actively managed mutual fund that you own on Monday and replace them with low cost ETFs. It could mean the difference between retiring in a tent in your backyard instead of in a villa in Cabo.