Debunking Common Mutual Fund Myths

One of the biggest challenges facing mutual fund investors is the hidden fees they have to pay for owning funds that were probably advised by brokers. We already know that the Obama administration is said to be taking measures to “crack down” on these brokers who are reluctant to put the best interest of middle class families first. The firms are said to be selling investments with “high costs and low returns” rather than sharing quality investment advice.

While that is something the Obama administration is seriously looking into, investors for their part also need to let go of the myths surrounding mutual fund investments. We will look into 5 mutual fund myths, and debunk them using sound investment advice.

Debunking 5 Myths by Smart Investing

Only Experts Gain from Mutual Funds: Many believe investors need to be certified experts to understand mutual funds. However, that is not the case. Basic understanding of the markets and picking the right funds should be enough. Moreover, mutual funds that own a basket of securities are professionally managed by fund managers. Unlike for equities, here investors don’t need to keep tracking the correct timing of buying or selling shares. The fund manager takes care of that. 

Smart Move:  Based on that, the following Healthcare mutual fund may be a good addition as it carries favorable manager rating. It measures the risk-adjusted performance of a fund’s management relative to the fund’s peer group. Also, the fund has a proven record of impressive performance over the last 1 and 3-year periods. It also carries a low expense ratio and has no sales load.

ICON Healthcare S (ICHCX - MF report) invests most of its assets in equities belonging to the Health Care sector. The equity securities include both common stocks and preferred stocks of health care firms irrespective of their market capitalization.

ICHCX carries a Zacks Mutual Fund Rank #2 (Buy). The manager rating currently is a significant 20.4. It has returned 33.1% and 28.9% over the last 1 and 3-year periods.

Mutual Funds can be owned for No Cost: This is not entirely true. There are costs associated with owning mutual funds. Investors in mutual funds incur two primary kinds of expenses and fees: fund expenses and loads. Whereas fund expenses are paid indirectly from fund assets throughout the year, sales loads are one-time fees that investors pay either at the time of purchase or when units are redeemed.

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By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. ...

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