Why Invest by Yourself?
Top 10 Reasons Why You Should Invest By Yourself
- No one cares more about your money than you do.
- The majority of mutual funds under perform the stock market.
- It really isn't that hard to learn about value investing and implement it successfully.
- Stock brokers and mutual fund salespeople earn commissions which means they make money even if you don't make money. Stock brokers make more money by advising you to buy and sell often rather than buy and hold.
- Mutual funds charge an annual fee called the Management Expense Ratio (MER). In most cases this is a hidden fee and it is charged every year whether a fund does well or does poorly. MERs reduce the fund's performance.
- Most successful investors became successful by investing on their own, not by purchasing mutual funds, term deposits, or bonds.
- Can you really get unbiased advice from mutual fund sales people who work for and earn commissions from their respective mutual fund companies?
- Most fund managers are under pressure to perform well in the current year. Therefore it is in their interest to at least match the performance of their colleagues. Sometimes stocks are sold for quick gain rather than being held for larger long-term gain.
- You pay taxes on any capital gains incurred by the mutual fund annually; even if you don't withdraw any money that year.
- A mutual fund will drop in price if a large number of mutual fund holders decide to sell their funds in a short amount of time. This is especially worse during a market downturn, at which time everyone runs to their mutual fund company to redeem their money. This forces the fund manager to sell even when some stock holdings might still be undervalued and worth holding on to.
7 Bonus Reasons Why You Should Invest By Yourself
From Stephen Jarislowsky’s “The Investment Zoo: Taming the Bulls and the Bears”
- “Unfortunately, ripping off clients is very common in our industry today. I’m not talking just about
investment counseling but to a large extent about underwriting firms and mutual fund companies. It’s pretty evident what they’re all about: charge the highest fees possible and make as much money for themselves, not the client.” page 27
- “Stockbrokers and investment advisors, for their part, too often have their own interests, not those of their clients, uppermost in their minds.” page 75
- “…most brokers are judged by the commissions they bring in rather than by how well their clients do.” page 76
- “And the reality is that financial advisor fees and mutual fund management and sales fees ‐ just like brokers’ commissions ‐ come straight out of the investors’ wallets.” page 77
- “Clearly for investors, all things being equal, the fewer fees you pay the more your total wealth is maintained.” page 77
- “Simply put, most mutual funds are very expensive, with up to half your expected long‐term gain siphoned off in fees at no risk to anyone but you.” page 81
- “My basic conclusion is that it is supremely important to minimize the expense of investing, since each annual 0.25% makes a big difference over a 20‐year period.” page 84