So you are looking to invest your money. You want to save for retirement and you want your savings to grow until you need them. The issue is that unlike large investment firms, you don’t have the capital, or knowledge, to properly diversify your funds for the safest investment portfolio with the highest return. For this reason we often resort to mutual funds. These funds are managed by a knowledgeable investor, provided a diversified portfolio, are available to any investor, and overall, take the work out of investing. Why would you invest in anything else when such an attractive option is available to you? Well here’s one reason–mutual funds suck. First of all, although this is not broadly applicable to all mutual funds, most funds charge either a front end load, back end load, 12b1 fees, or any maybe all of the three. These apply to added expenses when entering the fund or leaving the fund. This may be somewhat understandable to some, not me, based on the expertise provided by the fund yet the reason for 12b1 fees baffles me. These are marketing fees for a mutual fund. Yes, these are fees acquired in the advertising of a mutual fund that you as an investor are paying for. The success of the fund should speak for itself and marketing should be unnecessary. Let’s however assume for a second that none of these fees are charged for our fund since there is such a thing as no-load funds. However just because the fund does not directly charge you unnecessary fees does not mean they aren’t there. With mutual funds we typically see managers “over managing” their investments. This means that they are constantly trading and redistributing capital to what they believe is the optimal ratio. The issue with this is that it means they are constantly racking up transaction costs which in the end get passed on to you and stand to eat away any profits they stand to gain. You may still think that even with these added expenses it is still better to invest with a fund rather than test the waters by yourself. However there are diversified alternatives to giving away your profits. My advice would be to put your money in the S&P500 market index. This is a diversified fund of 500 large and consistent firms. This index charges no loads and acquires minimal transaction costs since it rarely reallocated funds. What’s better is that they have been proven in the past to generate returns on the same level or exceeding the mutual fund average return. Yes, this means that with all their prestige and education the expertise that mutual fund managers add is really nonexistent. Therefore they are collecting these fees for their services without providing any added benefit to you, the investor. Sounds like a scam right? I urge you to avoid mutual funds with your hard earned money. Personal diversification is an option if you have the time and knowledge to play the stock market “game”. If not then I strongly advise you to simply put your money in a market-wide index and just leave it there. Your return will be consistent and you will be able to rest easy knowing your profits will not be going to anyone else.