I detest mutual funds and it is not a secret. I say it all the time.
People believe they are being financially responsible if they are investing money in mutual funds etc. They couldn’t be more wrong.
But don’t take my word for it.
People use example of Warren Buffett. WB did not become rich by investing in Mutual Funds. He invested directly in companies that had value. But even that is not how he made his wealth.
Majority of the income of Berkshire Hathaway comes from TRADING OPTIONS, and not investments. Source: Google.
I haven’t met anyone who became financially free because if their ‘investment’ in mutual funds.
Let’s be honest, Mutual funds return 8–13% on an average per annum. Just enough to beat the inflation and a cherry on top. Source: Coin
Let’s assume an average 10% return every year and we are investing 1 lakh every year and letting it compound.
After 10 years, our total portfolio will be worth Rs 16 lakh, which cannot even pay for 1 year worth of expenses.
Oh and tax not included yet.
You will have to stick with this for another 20 years to reach at a point where you can comfortably live for 5–6 years. That’s not my goal in life.
I doubt anybody grew up with a dream that they will work for 30–40 years, live frugally and save every penny they make in a mutual fund, only so when they are 60 and have to retire, they have enough money to live frugally for the next 5–10 years.
But that is the reality of modern-day, self-taught Mutual Fund Investors. It will become clear when people get burnouts from their jobs only to find out they have no investments to fall back on.
Even investing in Index funds is better than investing in Mutual Funds, because the return is higher, much safer and no commission that takes away half your profits.
I don’t want to die mediocre.
So I take risks and invest in sweat equity, real estate etc. Things that are slightly more risky, but offer much much better returns. I am talking 10–20 years worth of mutual fund return in 3–5 years.
Do not trust me. I am just a random guy on Quora.
Do your own math.
Calculate your expenses and savings. After inflation, just calculate how many years of working a job will be needed to create a portfolio that actually makes you rich. 120 years? 200? I have done my math and decided to take my decision that differs from the majority.
Think for yourself, don’t side with the majority. Because majority of the people are always wrong. Siding with majority will not make someone in the top 1%
Source : https://www.quora.com/Why-is-it-not-recommended-to-invest-in-mutual-funds