If we can’t pick a stock, do we turn to mutual funds? A mutual fund is basically investing in a person(s) that pick stocks for us. So if we can’t pick a stock, what makes us think we can pick a person that can pick a stock? Picking mutual funds isn’t easier, is it?
If an adviser picks mutual funds, especially loaded funds, there is almost no hope of coming out ahead compared to the index as the fees and taxes give the results quite a haircut. Study after study points to index funds for the average investor as the best way to go because even with no-load funds in a tax free account the vast majority don’t beat their benchmark. With actively managed mutual funds, the odds are against us before we start.
If you can’t pick stocks, what makes you think you can pick a person that picks stocks (mutual fund manager)?
And if you can’t pick a person a person that picks stocks, what makes you think you can pick a person (financial adviser) that picks a person (mutual fund manager) that picks stocks?
In other words, if you don’t know what you are doing, how do you know if what you are doing is right?