Mutual funds: useful or harmful investment?

For many retirees, ensuring a peaceful lifestyle over the years through their investments is a great source of stress.
Some use mutual funds to gain broad market exposure, rather than targeting individual stocks.
This may seem like a good idea: mutual funds can be useful investment tools.
Before opting for a mutual fund-only portfolio, however, you need to know the pitfalls.
To evaluate the pros and cons of mutual funds, read "The five pitfalls of mutual funds" and the periodic updates from Fisher Investments Italia, indicated for investors with assets of at least 350 thousand euros, who could benefit from a different approach.
Read now “The five pitfalls of mutual funds” by Fisher Investments Italia On the surface, mutual funds can offer effective portfolio diversification.
A fund exposed to different types of stocks and bonds can balance risks and support its long-term growth.
However, a portfolio with too many mutual funds or the wrong selection of funds risks being overly diversified.
What does it mean? In our experience, many high net worth investors hold between 5 and 10 mutual funds in order to diversify their portfolio.
If we consider that an Italian equity mutual fund holds on average 140 shares, an investor with 10 funds could own at least 1,400 shares.
With such a large number of stocks, the risk of excessive portfolio concentration in a specific sector, style or company increases.
Let's take another example: two European investment funds offered by the same manager – one for value stocks and another for distribution stocks – have more than 130 identical positions.
European value dividend mutual funds An investment in the two funds would significantly increase portfolio risk.
Read now “The five pitfalls of mutual funds” Another critical issue of mutual funds is the lack of customization.
An investment strategy should align with the investor's goals, but mutual funds are not designed for a specific individual.
They have rigid mandates and their own strategies to follow, which probably do not align exactly with the investor's personal needs.
High-net-worth investors are best served by consulting a wealth advisor who can tailor their portfolio to their goals and market conditions.
The five pitfalls of mutual funds and periodic updates offer further insights to prepare financially for a long-lasting and satisfying retirement.
Read “The Five Pitfalls of Mutual Funds” Now In addition to these pitfalls, mutual funds can be expensive, with complex and layered fees.
Some funds charge an initial sales or transaction fee.
Others charge “front-end” or “back-end” sales charges when you buy or sell shares.
Added to these are management fees, expense ratios and transaction costs.
And that's before you even have to pay taxes! Mutual fund fees accumulate easily and can eat away at a significant portion of your return.
What other risks can you face with mutual funds? How can you improve an investment strategy to have a financially secure retirement? Download now "The five pitfalls of mutual funds" Investing in the financial markets involves the risk of loss and it is not possible to guarantee that the capital invested, in whole or in part, can be repaid.
Past performance does not guarantee, nor is it a reliable indicator of, future performance.
The value of investments, and their returns, are subject to fluctuations in global stock markets and international exchange rates.
Fisher Investments Italia is the commercial name used by the branch of Fisher Investments Ireland Limited operating in Italy (“Fisher Investments Italia”).
Fisher Investments Italia is registered with no.
182 in the "List of Investment Firms authorized in other EU States with branches in Italy", kept by the National Commission for Companies and the Stock Exchange ("Consob"), and in the Company Register of Parma (registration number and tax code: 97838750152; VAT number: 02903080345; REA number: PR-276048).
This document contains the general opinions of Fisher Investments Italia and Fisher Investments Europe and should not be considered as personalized investment or tax advice, nor as a reflection of client performance.
There can be no assurance that Fisher Investments Italia or Fisher Investments Europe will maintain these opinions, which may change at any time based on new information, analysis or reconsiderations.
Nothing herein should be construed as a recommendation or prediction of market conditions.
On the contrary, it is to be understood as the illustration of a thesis.
Current and future market conditions may differ in many ways from those illustrated here.
Furthermore, no guarantees are made regarding the accuracy of the assumptions made in the examples herein.
Investing in the financial markets involves the risk of loss and it is not possible to guarantee a full or partial refund of the capital invested.
Past performance is not a guarantee or a reliable indicator of future performance.
The value of investments and their returns are subject to fluctuations in global financial markets and international exchange rates.

Author: Hermes A.I.

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