A buddy quoted Robert Kiyosaki of Rich Dad fame to me a few days back, saying “Mutual Funds Are For Losers.”

(This same buddy invests in index funds which are technically mutual funds but that is an entire other post.)

Well, chock me up as a loser because I do hold mutual funds, both now and in the past.

Now, my emergency fund (or opportunity fund depending on whether you’re a half empty, half full type of person) is in a no load money market fund held via my bank. I can transfer in and out on the same day, have instant access to my cash, and I count it in the bond part of my portfolio make up. It isn’t going to make me rich but then, that is not the purpose.

But in the past, most of my holdings (meager though they were) were in mutual funds. You see I started investing $25 a month. Not much could be purchased with that (except maybe a few Starbucks coffees) and definitely nothing remotely diversified.

Add to that, I was completely ignorant in the ways of investing. I was an investment virgin. My only experience with investing was through safe and stable term deposits (or the equivalent). Yeah, I was a saver, not an investor.

I could have waited, saving my $25 in a high interest savings account until I could actually purchase something worthwhile (like a complete lot) but would this have pushed me to learn about the market? Would I have had the experience of comparing my mutual funds to other mutual funds? Looking at the investment make up, figuring out why the fund manager was making the changes in the fund, watching the market’s ups and downs?

Nope. With time pressures being what they are (tight, always tight), I would have said “I’ll learn that later” and never have. Without my own money in the market, there was no reason to do the work, no urgency.

I made my share of mistakes with my small, piddley dollars. I invested in sector funds that were “hot” (like technology, ouch) and got burned. I invested in bond funds when interest rates were rising. I lost hundreds, not thousands of dollars (the price of tuition). These were junior jammer mistakes and I was happy (okay, I wasn’t happy but…) to make them while still a junior jammer.

So do I think mutual funds are evil and only “losers” invest in them? Of course not. A mutual fund is just one tool in the investment toolbox. It will not always fit the job (unlike another buddy who thinks a hammer is good for all fixes) but its still available.

K – you nailed it. Mutual funds are a vehicle, just not one that will make you wealthy alone. They have their purpose- even RK admits that in Why We Want You to be Rich: “There is a time and place for mutual funds. I invest in them occasionally. But to me mutual funds are like fast food; it’s ok occasionally, but you do not want to make a habit of consuming it.”

I think your point is they are a vehicle to learn on and tie up money for some growth, am I right?

I like the idea of holding a wide selection of stocks instead of mutual funds – saves on administration costs and you get more of sense of ownership. However, I don’t have enough right now to make it feasible. Maybe in a few more years.

What I do use mutual funds for is investing in sectors / regions I can’t get access to or want a higher concentration in (I have an international fund).


Okay, pro tips to people lifting the entire article…get my freakin’ name right!

pr…right on the money. If I was looking to grow my money and I had a bit of money to grow, I wouldn’t be plunking it in mutual funds.

Phil…great use of mutual funds.
Yeah, there are regions of the world that I’d like to play in but I don’t have the resources/connections to figure out which companies to buy (some markets are pretty darn scary, reporting wise). Lazy gal that I am, I’d pay the 2% for the fund manager to figure it out rather than try to do it myself.

Investment virgin?!?!

I tend to be less and less a believer in mutual funds. I was a holder of the Fidelity Aggressive Growth mutual fund from mid 1998 to about mid 2001. The fund was tearing it up with its great manager, Erin Sullivan on board. I bought in at arond 25 NAV. It reached a high point of around 75 NAV. I dumped some around 40 and the rest at 30. Some of the downturn was attributable to the tech collapse, but management was also a driver. The magic was gone when Erin left. It actually went as low at 9 something.

I learned that there are great fund managers that can make people very rich. Unfortunately, most now leave to start their own hedge funds as Erin did. I now am about 50% individual stock 50% mutual funds. Every year I pull more and more money from the mutual fund side. Eventually, when I convince my wife, we will probaby own no mutual funds.

Welcome to Investor Geeks (I am one of the less frequent posters..Too dang busy… Here is a link to one of my old articles- https://www.investorgeeks.com/articles/2006/09/12/protection-of-assets-and-long-term-care-insurance/ )


I agree. What I’m buying with my MER is the fund manager. Good fund managers can be worth the money (especially if I can learn from their buys and sells). Bad fund managers are not. When there is a change of fund managers, then the mutual fund should always be re-evaluated (same with changes in company management when I own shares).

The core of my investments are now out of mutual funds. I do, however, have a financial advisor (a whole other post in itself). I’m no do-it-yourselfer (a fan of outsourcing) but I’m not hands off by any means either.

Looking forward to your next post!

I’m not a huge fan of mutual funds either – however, I do own 1 in my Roth IRA, and 1 in my 401(k). But aside from those, which make up about 9% of my liquid net worth, I don’t like them.

I did a post recently on what I do with cash – the no load mutual fund is a neat idea for your emergency cash, but use a money-market account for what I keep in my trading account when it’s not invested. You can fin dit here if you’re interested: http://www.thealexblog.com/2006/10/24/what-should-i-do-with-my-cash/

It’s really interesting when I read blogs such as this one. I sit back laughing hard at the posts and I’m thinking that most of you must be very young. Although you make some sense in your reasoning, you send a bad message to basic investors. The average individual today has no knowledge about investing, not to mention the ups and downs of the stock market.

This leads me to mutual funds. I have a considerable amount of money invested in mutual funds and I have done better than most because of two reasons. 1. I started early. 2. I make contributions regularly (monthly).

I was introduced to mutual funds in 1983 when a mentor of mine invested $15,000.00 in a SB Aggr Growth Fund. He also contributed $100.00 each month and he is still doing so today. He informed me last month that his Fund (LM now) has a balance of over $400,000. That’s close to a half of a million. That’s more than most people I know have even if they are investing in stocks or index funds. So be careful of talking negative about mutual funds.

I also have that fund in my portfolio and it’s has done very well for me along with all my other funds and yes I also invest in stocks. So are mutual funds that bad??? I think not.


I guess it’s more of a question of your individual situation. I wouldn’t say that mutual fuds are bad, but I would say that there are better options – certainly better options for people who can put the time in to manage their portfolios.

I can totally agree with that. A lot of people don’t have the time to put into managing their portfolios. This is a major problem when it comes to the stock market. I do agree that there are many ways to invest your money to increase your retirement chances. Personally, I think you should utilize all that you can. I don’t believe there is a wrong way, because have a series 6, 7 and 63 license, I do understand that it’s up to the profile of the investor. It’s call suitability.

i am very new to mutual fund,
actually i want to invest 80000, and i don’t know whether it is safe to invest. If yes then please tell me the funds in which i can invest.

Navi, you should sit in cash for a few months in my opinion. The market is looking very toppy and since it made its new high, it hasn’t picked up steam like it has done previously.

If the market regains its strength, think about dividing your portfolio into 4 chunks and buy 4 ETFs.

One should be a big cap domestic, one a mid or small cap domestic, one a large cap international and then one in an emerging markets fund.

The most risky is the emerging markets fund – they have had a huge run over the last few years. However, you should have some exposure to asia and countries like Brazil.

The US domestic market is looking a bit sickly, proped up by huge amounts of credit and leverage, but with a poor economy.

With that in mind, I would consider switching your mid / small cap domestic to a resource weighted fund. The world isn’t making any more oil and if inflation takes off, commodities are a safer bet. I would steer clear of financial stocks e.g. banks, brokers / mutual fund companies and investment banks.

Good luck!


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[…] Kimber made a post about why Mutual Funds Aren’t for Losers, which was a good article and I see her point of view, however, in this case, I thought I would show the other side of Mutual Funds, which, in my opinion, suck to the point where vacuums should be named after them, or maybe they could rename the Chicago Cubs the Chicago Mutual Funds.First problem is, they are overly diversified, bringing your risk down, but also bringing down your profits. Hugely bringing down your profits. Bringing down your profits to the point where you have to wonder why you bought it in the first place. You’re essentially saying, “I don’t care what I get, as long as I get something. Sometime. Maybe.” According to the Christian Science Monitor: “The average US diversified equity fund grew 6.7 percent in 2005, the third upside year in a row, according to fund-tracker Lipper Inc. “ […]