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.