Mutual Fund Case Study

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If you have read or listen to Dave Ramsey, then you know that he is a big adovcate of investing you money into a mutal fund with a 12% return. He claims that by doing this you can be a millionarie in ...years by investing... a month. This has many of the so called investing experts sound an alarm and claim bs. Is the 12% return a year mutual fund real, or just a unicorn that people talk about?

Let 's take a deeper look in the the average returns of the stock market, and if any mutual funds actually beat the market on consistently.

From 1928 to 2015 the S&P 500 has an average return of 10% a year. While that sounds great, this number is misleading. If you think you can invest $100 and in 5 years have $161, you should know a couple of things
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However, there may be some issues you should think through before you invest.

Fees. How much money is the mutual fund charging you to invest your money. This is crucial for you long term returns. If a mutual fund is taking 3% of your money every year, this can add up quickly and really hinder your returns. High fees can take your 12% a year return to a 7% year return. No matter what mutual fund you invest in make sure you are not getting ripped off. Try to find mutual fund that take 1% or less a year.

AUM (Assests under management). You are not the only one looking for a great mutual fund. Millions of people look for a place to safely store their money. If a mutual fund is consistently beating the market, people take notice. This can create an overfunded mutual fund. As Warren Buffett once said, it is easier to make large returns when you only have to manage a small amount of money. More money to manage means more stress for the fund manager and less great investing opporunities. If you find a great mutual fund makes sure their assests under management are not growing too quickly. Some mutual funds have an investment cap, meaning they do not take in any new money at a certain

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