As any other way of investing your money, mutual funds have disadvantages as well. However, knowing the both sides of the certain type of investment may greatly decrease your money loss, or even avoid it at all. Knowledge is huge power

Fine print

Unfortunately, your investment in mutual fund is not guaranteed to provide a specific return, and greatly depends on the expertise and knowledge (sometimes luck) of the fund manager. In contrary, most of the bank deposits are insured and protected by law (a special government agency is monitoring it). When choosing a fund, always try to find out who is the manager, what is his(her) expertise level and what is the performance of the fund during the manager’s rule (how big the returns were). Nevertheless, most of the mutual funds will give you 5%-15% of profit every year, and even one year it will give you 0.5%, next year may bring in 20%; the longer you keep your investment in the fund, the smoother your average profits will be.

Starting Investment

In the beginning, all the mutual funds required a lot of money to enter the “club”, starting from $100,000. However, most of the fund managers realized that by such high requirement, they are loosing a big portion of the potential customers, so they lowered the minimum starting investment.
I put this one into disadvantages of the mutual funs only because of the following. You still need to come up with $1500-$2500 to open a mutual fund account if you dont want to make necessary monthly deposits. However, you also can start with $100-$200 if you agree to make regular deposits of, say, $50-$100 a month.

Oh My, Fees!

One of the major drawbacks of mutual funds is the overcomplicated system of commissions and fees. The government and the fund managing companies look at your money as a free-for-all, and treat it as a cow. That’s it, governments of many countries always try to review the income taxes from investing to make our lives miserable.
Many fund companies even tried to hide their commissions and other fees, making it difficult to compare different funds. Thankfully, some laws force them to publish the full list of their fees in the fund prospectus.
Here is my advice - dont fall for a nice graph of fund returns, check first what are the fees. High fees will eat your profit very quickly. Dont go with a mutual fund which fees exceed 1%!

Local Offices

Most of the funds dont have local offices in every major location. The reason for that is an attempt to save money. If you have a question, you have to call them by phone, or talk to your broker (through whom you’ve bought the fund shares). However, if you go with a big fund company like Vanguard or Fidelity, the chances they have local offices in every major cities are quite high.

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