InvestorQ : Can mutual funds come as a planned scam?
Ayushi Kampani made post

Can mutual funds come as a planned scam?

Answer
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Tanu Shukla answered.
1 month ago


No mutual funds are not scams, just like banks, insurance, or mortgages are not scams. A mutual fund is a convenient way to invest your money. I have used these examples because there are good and bad choices in all these categories. You can find banks that charge too much or pay to little, insurance that is too expensive or has onerous conditions.

But they provide solutions for those of us that can’t have multi-million dollar professionally managed investments. Think of them as a sort of financial "Cooperative" for securities. And just like financial instruments, they are prone to risk. The main risk that the market they invest in will perform poorly. Other risks - that the manager will perform poorly relative to that market, underlying assets will go bust, etc. While it is quite possible that an adviser could be guilty of offering bad advice, I find that calling an entire class of financial instruments "scams" as an overreaction.

You are always welcome to ask questions about the instruments or the methods from your financial adviser. They'd welcome your questions and love the opportunity to share why they recommend what they recommend. And given that a mutual fund is a regulated vehicle, odds of it being a scam ix next to impossible.