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Mutual Funds; Good or Bad Investment? May 23, 2008

Posted by shaferfinancial in Uncategorized.
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1 comment so far

I will keep this simple. I have posted often about my thoughts on mutual funds as an investment.  Here are the latest datum from Dalbar Inc. on the actual rate of return folks get from mutual funds.  I will put three columns together, actual returns from investors who invest in mutual funds, actual returns from the S&P Index and actual returns from Berkshire Hathaway.  Then I will post as a comparison the what if you invested $10,000 question that equity prospectus usually have.  This is a much more accurate comparison because negative returns hurt, and cause you to have to get a greater return to make up for the negative.

                  Actual Mutual Fund Return     S&P Index       Berkshire Hathaway

20 years                    4.48%                      11.81%                      19.77% 

10 years                    5.66%                        5.91%                       12.7%

$10,000 invested in Berkshire Hathaway Jan 1, 1988=  $315,381 Dec. 31, 2007

$10,000 invested in the S&P 500 Index including dividends with no expenses (an impossibility) on Jan 1, 1988= $93,423 on Dec. 31, 2007

I can’t do it for actual mutual fund returns because I don’t have year to year data. 

So there it is in stark black and white.  $315k actual numbers, versus $93K pretend, no expenses, number.  Actual rate of return over the last 20 years of 4.48%, which is 7.73% below the index and 15.29% below Berkshire Hathaway.   You make the decision.  Are mutual funds a good investment, or are they merely a hedge against inflation?

***Once again this is only the ravings of a person who can do math.  Shafer Financial does not have a license to sell equities (stocks), nor does the SEC consider him an “expert” who can give advice on particular stocks***