Is mutual fund becoming like stock market?
I still remember 20 years ago, mutual fund investing is relatively an unknown to most people in Malaysia. But ever since the introduction of Public Mutual, it has easily become THE preferred investment type in our country.
Why? Well, it’s because it’s more rewarding than our Fixed Deposit and less risky than investing in stocks. For some, it is because they don’t really need to manage their portfolio. They normally just leave it to the fund managers to handle their money for them. The losses will be minimal, and same goes to the rewards.
But lately, things have changed a little on the mutual fund front. There are more and more funds to choose from now. Investors need to read up about the background, the industry, market segment, etc before deciding which to invest in (and choosing a proper mutual fund can be quite a daunting task now). Also, investors can start to trade their mutual fund units ONLINE.
As you can see, the mutual fund we have now is no longer the same as the one we used to know. Instead, it has become something similar to the stock investing that we all know (and some of us fear) - online trading, a lot of options and plenty of research works to be done.
So other than the high service charges, the minimal losses and profits…. there’s really not much difference from stock investing. If that is the case, why are people still interested in mutual fund investing and the same group of people remain fearful of stock investing? Aren’t these 2 becoming incredibly similar? Mmm perhaps most people still don’t know anything about these 2 and the mutual fund…being cheaper, definitely looks to be ‘safer’.
Not really. For your information, my losses in mutual fund in the year 2008 was about 60% while my stock losses was lesser than that. And to make things worse, I can’t simply change/sell the funds because it’ll incur further losses for me – service charges. I can only stop putting money in, cost averaging, or switch to bond (and incur service charges). Who says mutual fund is safer?
That is why I always suggest people to look into stock investing. There’s really not much difference between the 2 and for me, the pros of stock investing far outweighs the pros of mutual fund. Treat mutual fund as a form of saving, and stock investing as…well…a form of investment.
But either way, you should know what you are putting your money in BEFORE you actually do so. Putting money into something you have no idea off is equivalent of gambling….and not investing. So thread carefully.
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Comments
@ Mrcoolku
Mmm i think it’s more of an illusion to think that mutual fund is safer. With so many types of funds to choose from, it’s really not much difference from stock investing. Also, the amount of money at risk depends on how much you put in which is applicable to both mutual fund investing and stock investing. 
Does many types of funds to choose from makes it as risky as investing in stocks? I”m not sure if I agree with this. I think it has nothing to do with how many funds that you can choose from. If only one fund is available for you to choose, it doesn’t mean it is safer too. It is a same thing as saying if there are many types of FD that we can choose from, it is as risky as investing in Mutual Funds.
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@ ChampDog
No worries that you don’t agree with me. Everyone has his/her own opinion. 
Well, just look at it this way. The more options you have, the more research you have to do. Let’s say fund A, what is it all about, how was the previous stats, who is handling it, what’s the history, and what are the companies the fund manager invests (normally) in. Then go on and check these companies 1 by 1 ….. if you really want to go to that extent.
Compare this with going to the stocks that you’re interested in and do research on these companies…. i seriously don’t see any difference. If one really wants to do a thorough research, I can say the research into mutual fund can be more challenging.
So what most people do in the end? They listen to the so-called fund agent who will always promote the latest funds and some even encourage you to trade often.
Does that sound “safer” to you as compared to stock investing?
I think at the end of the day, what I really want to say is that when given too many options, people tend to be lazy and not do any proper research for themselves. They just listen to others. And the current mutual fund world is like that which is, IMHO, not much different from stock investing.
Last but not least, the mutual fund industry in the US is much larger than ours. Before this, this industry prospered and helped investors earn. Then people started to introduce more n more funds…and the losses keep going up as well. And not surprisingly, only 30-40% of the fund introduced in the last 5 years managed to survive. Before this, the so-called ‘success rate’ was higher.
p/s…. to add on, Seth Godin did mention also that people are afraid of having too many options. They’re afraid to pick the wrong one. Ask people why they don’t dare to go into stock investing, they will tell you it’s either they don’t know which right stock to buy, or they’re scared of the amount of money involved.
jz my 2 sen.
Agree with you that there is less different between mutual fund and stock if mutual fund also can be traded online. Maybe mutual fund more suitable for older or conventional thinking investor.
I prefer stock rather than mutual fund for the time being. XD
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