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128 Don’t Make Me Say I Told You So
and return the principal at maturity, there is no assurance that
mutual funds which own these bonds will not drop in value.
Costs
When you invest in mutual funds or use a separately managed
account through a fund manager, you are hiring someone to
manage your investment portfolio and make the decisions as
to what securities to buy or sell.* 1
No one, of course, is providing these services for free. It’s
important to know what the cost of ownership is for any mutual
fund you own or any fund manager you use. The annual fees
associated with using a professional manager will be higher
than if you bought individual stocks and held them in your
portfolio.
Although the initial cost of buying stocks may be lower
when using mutual funds or individually-managed stock
portfolios, the efficiencies of fund ownership may be offset by a
combination of sales commissions, 12b-1 fees, redemption fees,
and operating expenses. It’s important to compare the costs of
funds you are considering. Always look at “net” returns when
*Index fund and most exchange-traded funds are not actively managed.
Chapter 3: You Must Have Growth In Your Portfolio
