Best Mutual Funds Now

Many investors often ask themselves, should I buy the best index funds or the best managed mutual funds.  This is a very big dilemma that people face.  Hopefully after reading this article, you have a clearer game plan for buying the best index funds or buying the best managed mutual funds.

Advantages of investing in managed mutual funds:

Most people want their investments to perform better than the stock market averages.  Only through the use of a managed fund will you get better performance than the stock market averages or whatever market your fund is based on.  The biggest advantage for investing in managed mutual funds is that you get a expert mutual fund manager who is actively managing your money.  The mutual fund manager will be researching which stocks will perform best given the goals of the fund.  The mutual fund manager will also be researching when it is best to sell the stocks that comprise the assets of the mutual fund.  But, does this active management make managed funds the best mutual funds?

Advantages of the best index funds:

While managed funds have active management does this really increase the likelihood of better performance?  From what I have read, the answer seems to be no.  This section of the article will highlight the advantage of index fund investing.

One of the biggest reasons why the best index funds tend to outperform managed funds is that they have lower fees.  If the mutual fund is taking less of the money from the assets to pay the fund, this keeps more of your money making money as opposed to paying salaries.  There is very little evidence that mutual funds with higher fees perform better than funds with lower fees.

However, I want to point out that there are still a lot of managed funds with low fees.   You can read about some of these funds in these articles, Vanguard Equity Income Fund review and the Vanguard Wellesley Income mutual fund.

Besides low fees, what are some other advantages of investing in index funds?

When you invest in an index fund, you know exactly what investments the fund is going to buy.  Since the funds track an index, you don’t have to worry that the mutual fund managers will actually be investing in other investments.  While a mutual fund has an investment strategy, only with an index fund to you know what you are going to get.

Index funds tend to pay less in taxes.  As you pay less in taxes, more of your money is making money as opposed to paying Uncle Sam.  This can make a huge difference on your mutual fund performance.

So which is best, index funds or managed funds?  I personally think that index funds are best, but there are managed funds that perform better.  The problem is that it is hard to predict which fund will actually outperform the market.  Therefore, I invest mostly in index funds, but invest a portion in managed funds.

As you know, here at Best Mutual Funds Now, we love the Vanguard mutual fund.  Some of the best index funds are Vanguard index funds.  There are many reviews of Vanguard funds here so check them out.

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