Investing in mutual funds is probably a good idea for the people who don't know how to manage their money. If you don't want to see a flat line for the rest of your life (and that's what you'll get by investing your money in a savings account), but don't want to spend time checking the reports and how the market behaves, the mutual fund are the right choice. However, a lot of fund managers fail. What's wrong is that they still get their share of money and only the investors lose. It happens. It happens a lot, especially with the funds that invest in high risk shares.
This was what Bogle, founder of Vanguard was champion of. He pointed out how these managers are market-timing, and half the time get wrong. Add in the cost of those transactions and you get the vast majority of fund managers not even doing as well as the monkey index that gives you the same basic exposure. The biggest joke in the industry Bogle dismantled was how all these "growth stock funds" were not beating the S&P 500 index - their benchmark, compared easily at Morningstar.com for all to see. It was a great day when 401ks started having low-fee index funds - I was recommending them all the time for those who wanted exposure in those areas (limited then, but so much more variety today). I've set up many a retirement account for family and friends, and the best is when they have brokerage access. Because now, if you want exposure to riskier corporate bonds, reits, biotech companies, etc. you can find a low-fee index that is scandal-free because it is not tied to the screw ups of a particular fund or fund manager.
YET- we don't have a crystal ball and have no way to know what will happen to any fund or stock down the road. There has never been and will never be any investment in the market that is safe or for that fact even predictable. It is all speculative... but with that being said it is not impossible to minimize some of your risk. I have to agree with 111kg, mutual funds are good long term investment vehicles for people that do not know how to manage money or are not willing to be more hands on. If they have the funds to do it annuities might not be a bad option either. Anything that is better then a traditional savings account is a good choices long as there are some gains over the long haul.
Well, index funds are good, but only in the countries that have a good economy. In my country, for example, there are only 737 investors in the most "popular" index fund, mainly because our economy is pretty s***ty. In fact, are there any good index funds in Europe? Just see for yourself the evolution of an index fund that follows the ATX index in Austria. LE: Damn it, can't post links. Maybe this works? i.imgur. com /rodudId.png (remove the blank spaces)
