Disadvantages of Mutual Funds

Are There Really Disadvantages of Mutual Funds?

Before you invest, you should do your homework. Will you choose to use mutual funds, closed-end funds, ETFs, and/or individual stocks and bonds? Inevitably, your homework assignment will lead you to articles outlining the disadvantages of mutual funds. But are all of these so-called disadvantages of mutual funds really disadvantages of mutual funds? Let’s take a look at several so-called disadvantages of mutual funds, and how you can avoid them.

So-Called Disadvantages of Mutual Funds?

• Disadvantage 1: Mutual Funds Have Hidden Fees
  If fees were hidden, those hidden fees would certainly be on the list of disadvantages of mutual funds. The hidden fees that are lamented are properly referred to as 12b-1 fees. While these 12b-1 fees are no fun to pay, they are not hidden. The fee is disclosed in the mutual fund prospectus and can be found on the mutual funds’ web sites. Many mutual funds do not charge a 12b-1 fee. If you find the 12b-1 fee onerous, invest in a mutual fund that does not charge the fee. Hidden fees cannot make the list of disadvantages of mutual funds because they are not hidden and there are thousands of mutual funds that do not charge 12b-1 fees.
  
  
• Disadvantage 2: Mutual Funds Lack Liquidity
  How fast can you get your money if you sell a mutual fund as compared to ETFs, stocks and closed-end funds? If you sell a mutual fund, you have access to your cash the day after the sale. ETFs, stocks and closed-end funds require you to wait three days after you sell the investment. I would call the “lack of liquidity” disadvantage of mutual funds a myth. You can only find more liquidity if you invest in your mattress.
  
  
• Disadvantage 3: Mutual Funds Have High Sales Charges
  Should a sales charge be included in the disadvantages of mutual funds list? It’s difficult to justify paying a sales charge when you have a plethora of no-load mutual funds. But, then again, it’s difficult to say that a sales charge is a disadvantage of mutual funds when you have thousands of mutual fund options that do not have sales charges. Sales charges are too broad to be included on my list of disadvantages of mutual funds.
  
  
• Disadvantage 4: Mutual Funds and Poor Trade Execution
  If you buy or sell a mutual fund, the transaction will take place at the close of the market regardless of the time you entered the order to buy or sell the mutual fund. I find the trading of mutual funds to be a simple, stress-free feature of the investment structure. However, many advocates and purveyors of ETFs will point out that you can trade throughout the day with ETFs. If you decide to invest in ETFs over mutual funds because your order can be filled at 3:50 pm EST with ETFs rather than receive prices as of 4:00 pm EST with mutual funds, I recommend that you sign up for the Stress Management Weekly Newsletter at About.com.
  
  
• Disadvantage 5: All Mutual Funds Have High Capital Gains Distributions
  If all mutual funds sell holdings and pass the capital gains on to investors as a taxable event, then we have a found a winner for the list of disadvantages of mutual funds list. Oh well, not all mutual funds make annual capital gains distributions. Index mutual funds and tax-efficient mutual funds do not make these distributions every year. Yes, if they have the gains, they must distribute the gains to shareholders. However, many mutual funds (including index mutual funds and tax-efficient mutual funds) are low-turnover funds and do not make capital gains distributions on an annual basis.
  
  In addition, retirement plans (IRAs, 401ks, etc.) are not impacted by capital gains distributions. There are also strategies to avoid the capital gains distributions including tax-loss harvesting and selling a mutual fund prior to the distribution. 

credit to :
http://mutualfunds.about.com

Health Insurance Decisions

When you take out your health insurance policy, there are many different things you must consider. What might immediately spring to mind is the premium of the policy, but there are other concerns that you should think about before paying that first premium.



HMO vs. PPO: An HMO policy is pretty restrictive about the doctors that you can see on the plan. You may only visit those doctors who are in-network if you want to pay a pre-negotiated rate or have insurance help you out at all. A PPO policy offers you a bit more flexibility in that you can visit doctors outside the network and still get some financial recompense from the insurer. If all your favorite doctors work within an HMO network, this could work out great for you. But if you have established relationships with doctors outside the network, then a PPO could be a better choice.

Deductible and Out of Pocket Maximum: Your premiums aren't the only monies you will need to spend each month when you have health insurance. If you have an HMO you may need to spend money on copayments. If you have a PPO, then you might have both deductibles and out of pocket maximums - both of which will determine what you are financially liable for each year in addition to premiums. In fact, your insurance benefits won't even kick in until you've spent your deductible. Deductibles and out of pocket maximums can be small or large amounts and they can present an impressive financial burden if an accident or medical need arises and you are not ready for it.

Limits: Every insurance policy has a lifetime limit. That means there is a maximum dollar amount that your insurer will pay out on your behalf over the course of your lifetime. Often these limits are in the millions, which sounds like a lot, but if you have or develop a chronic illness or injury that needs extended care, you may find yourself reaching the limit pretty quickly. A lower limit protects the insurance company's interests and will reduce your premium, but it also creates more potential liability and exposure for you.

Group or Individual Policy: Many of the above choices and decisions become moot when you are offered acceptance into a group policy, or do they? Group health insurance policies are great options for some individuals, especially those with pre-existing conditions who are often denied individual coverage because of their health history. But what about healthy individuals who are young and have almost no history of illness? For these individuals, the rates offered by group insurance policies may not be beneficial and the inflexible benefits might also be unsuitable for their lifestyle and risk. This is why it is best to compare rates on individual policies with various network structures, limits and deductibles, to the rates of a group policy. This ensures that you get the best deal for you and your health history instead of just taking what's available.

When looking at health insurance options always do your best to evaluate all the options and weigh them according to importance - don't just think about premiums.

Read more: http://www.articlesbase.com/insurance-articles/health-insurance-decisions-5007965.html#ixzz1RlmOydCp
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