Most investors own mutual funds in their retirement accounts, and the common thinking is that’s a smart and safe decision. But is that actually the case? We’ll examine some financial propaganda and discuss why mutual funds are actually costing you quite a bit of money.
Ryan and Bob were reading through headlines recently and saw a few different articles about mutual funds that caught their attention. So many investors build retirement plans with these funds included but is it in their best interest?
On this podcast, we wanted to highlight the financial propaganda out there as the main focus of our show. It’s usually just one segment of a bigger rundown, but we saw enough about mutual funds that it made sense to spend more time on the subject.
Did you know that many funds are unable to outperform their underlying index? That’s probably a surprise because we expect these managed investments to produce strong returns for our portfolio. Then there’s the issue of fees and capital gains. You could end up paying around one percent as a fee and then be on the hook for capital gains at the end of the year. Those costs quickly add up and can put a big dent in your growth.
After our discussion on mutual funds, we’ll bring on Michelle McKinnon, certified financial planner, for our spotlight segment. She recently worked with a couple that wanted to get reinvested for the first time since 2008 and she walks us through that process and what she was able to do for the clients.
Here’s the rundown for this episode:[0:31] – Financial Propaganda of the week
[0:48] – Bob’s propaganda: Several studies show money manager’s mutual funds are unable to outperform their underlying index.
[1:36] – Why would anyone own a mutual fund today?
[3:23] – Propaganda: For the first time, ETFs have more money under management than actively traded funds.
[4:29] – Propaganda: Capital gains, are you letting history repeat itself?
[5:16] – The end of the year is a great time to do some tax-lost harvesting. Also consider taxes when taking RMDs.
[7:28] – This week’s spotlight: Certified Financial Planner Michelle McKinnon joins the show to share a client story about working with a couple to get reinvested after 2008.
[10:00] – The return on Stable Value is horrible.
[11:04] – There’s almost more risk not being invested than being invested.
[12:39] – The couple’s reaction to some of these changes we made.
“If you have a $500,000 portfolio, last year was a good year in terms of paying out capital gains for mutual funds. That cost you almost $15,000 in taxes. Why pay $15,000 in taxes when you don’t have to?”
– No Payne No Gain Podcast
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