hr: Money

I’ve just been doing some research, and I’ve come across an interesting concept. Till now, I was pretty much under the assumption that whatever fund you have invested in, is going to be more or less the best investment strategy for me.

Photo Credit: heipei

However, I have recently discovered, that several funds charge me a hefty premium for managing the assets that make up the fund. One particular Mutual fund that also gives me tax benefits is charging me a 2.5% Entry cost. This means that if the fund doesn’t outperform the market by at least 2.5%, I would have been better off investing in stocks that make up a specific market Index!

It turns out that approximately 2/3rds of actively managed funds don’t beat the market index. If this is the case, I might end up losing up to 5% gains compared to a simple index linked Mutual Fund. In addition, Index funds don’t have any management fee, since there’s nothing to manage. Seems like a great opportunity. Of course, they won’t offer tax benefits, and so I need to look into the pros and cons of this.

But for most people, this could be a great lesson. After looking at these results, I’m seriously considering shifting my investments into a simple index linked fund, put in money regularly, and just letting them lie there till kingdome come.