Mutual Funds are Hazardous to Your Wealth 2

Most investors sustained serious damage to their wealth last year — damage that, in many cases, will be difficult to overcome. Certainly, Wall Street titans, reckless lenders and irresponsible home buyers all deserve their share of the blame.

But one part of the financial world has not received much scrutiny for its role in the evaporation of investor wealth, and that is the mutual fund industry.

Mutual funds control the majority of Americans’ retirement assets through 401(k)s, IRAs and annuities. Sadly, a gullible public has bought into the idea that steady investments in mutual funds, regardless of market conditions, are the way to make financial dreams come true.

This is one of the biggest fallacies of investing, and a reason why mutual funds are hazardous to your wealth.

To give you a sense of just how flawed the buy-and-hold philosophy advocated by the mutual fund industry was in 2008, just look at the numbers. According to the mutual fund industry’s own Investment Company Institute, investors lost almost $3.7 trillion in mutual funds in 2008. Yet, how often do you read about mutual funds leading the public down a losing path? How often do you hear about a fund manager whose performance was drastically lower than the benchmark?