These slides examine some of the positives and negatives of mutual funds. Take a look and find out whether they are the right asset for your portfolio.

1. LEARN MORE
ABOUT MUTUAL
FUNDS
MICHAEL MORROW
WWW.MICHAELMORROW.ORG

2. Liquidity
When it comes to liquidity, mutual funds
usually get a good rating.
If you want to access the money in the fund,
you can do so without any penalties or extra
taxes.
However, the degree of liquidity depends on
the type of funds you own.
There are three different classes of mutual
funds, and each class has different fees
associated with it.

3. Safety
If mutual funds received a rating for safety, the
rating would not be very high.
The success and failure of mutual funds
depend on the performance of the market.
When the market is up, so is the mutual fund.
But when the market is down, so is the mutual
fund.
If safety is your biggest concern when it comes
to your assets, then you should seriously
consider how comfortable you are facing the
risks of the market.

4. Expenses
With mutual funds, there are two fees that
immediately stand out: the fund management
fee, or administrative fee, and the fee
associated with using a financial advisor.
Management fees can vary from low to high.
However, Morningstar reports that the average
management fee for a mutual fund is 1.25%. A
1.25% management fee is actually similar to
the management fees of other assets out
there.
Many people need the assistance of a financial
advisor to help them manage the fund, and
that adds another 1 or 2 percent to the
expenses.

5. Rate Of Return
Since mutual funds are tied to the market,
their rate of return can vary significantly.
Mutual funds have the potential to grow over
time, but many investors fall prey to their
emotions. They either get worried and sell too
soon or chase top rated mutual funds with the
hope of making more money.
The typical bond investor has only averaged a
0.59% return over the last 30 years.

6. Tax Efficiency
Since you’re taxed when the fund manager
sells individual assets, you can end up paying a
lot of taxes on a mutual fund.
Each year you’ll receive a 1099 form for the
fund. If any assets were sold in less than a year,
they’ll be considered ordinary income, and
you’ll have to pay the expensive taxes
associated with that.
On the other hand, assets held for more than a
year will be taxed as capital gains. If you use a
mutual fund manager like the majority of
people, you have no control over when the
manager buys or sells assets.
One strategy to avoid excessive taxes is to
invest in an index fund that has low turnover
rates rather than an actively managed fund.