The marketplace is run by some very intelligent people. Those individuals are quite cunning when it comes to creating investments for those they serve. Mutual funds were concocted in 1924 as a way for investors to alleviate the burden of picking stocks themselves. The idea was to give the average person a chance to simply choose from a variety of funds and let their money sit. Mutual funds come in all sorts of flavors for you to choose from: large-cap, mid-cap, small-cap, biotech, 3D printing, social media platforms, Asia, Europe, and whatever other category you can throw together. Many find them favorable due to a greater level of diversification. Instead of picking 5 stocks to invest in 3D printing, you could choose to buy a mutual fund that holds all of the best players. In this manner, you are investing in a sector, rather than a specific company. Mutual funds are also commonplace in investment accounts such as an IRA, or a 401(k).

Little risk? More diversification? Hands off? What’s the catch? The mutual fund investment vehicle has been popular and profitable for decades and loved by Wall Street. Simply put, the catch is that money managers are going to charge premium fees for their services. The money spent paying the big guys to pick your stocks is going to cut into your overall profits and retirement income. The amount you end up paying up will vary depending on the fund. There are some low-fee funds, but for the most part you can expect to get knifed in the wallet by the guys taking care of your money. In some cases, higher fees will be justified. If you are getting good returns and not having to worry too much about losing all of your savings then you might as well ride this one instead of doing nothing.

Yes! Invest in a mutual fund.

  • Less to worry about when you don’t have time to manage your investments (especially during deployments and field training)
  • Diversified portfolio of stocks

No! Stay clear of mutual funds

  • Fees … Fees … more Fees. You could end up paying tens of thousands over the course of a lifetime
  • Funds do not always beat the market so you end up paying heavy fees and losing capital
  • If you own multiple funds they may contain similar holdings which means you aren’t as diversified as you thought

The main thing you need to know if that mutual funds definitely have their place when it comes to investing your money.  If you have some time to manage your own portfolio then I would limit investments in these funds and try to beat the market on your own. However, as Marines we are always going to be busy doing what we need to do. Don’t let your investments detract you from taking care of your Marines. A mutual fund may be the peace of mind you need. Know yourself and decide what works best. I would also like to suggest index funds as a great alternative to mutual funds.