Disadvantages of Mutual Funds
- The Wisdom of Professional Management. That’s right, this is not an advantage. The average mutual fund manager is no better at picking stocks than the average nonprofessional, but charges fees as though she is.
- No Control. Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of somebody else’s car.
- Dilution. Mutual funds generally have such small holdings of so many different stocks that insanely great performance by a fund’s top holdings still doesn’t make much of a difference in a mutual fund’s total performance.
- Buried Costs. Many mutual funds specialize in burying their costs and in hiring salesmen who do not make those costs clear to their clients.