Mutual Funds

For years, I have been critical of mutual funds. They are horrible investment vehicles designed for financially average people. Over the years, many financial experts have fought back against me because they are sponsored by mutual fund companies. On TV programs and in popular financial publications, you will see these mutual fund pushers offering the same old advice: "Invest in a well-diversified portfolio of mutual funds for the long term." This is average advice for average investors; it is not good advice.

One of my heroes is John Bogle, founder of The Vanguard Group. As the inventor of the index fund, which keeps fees low by reducing management overhead, he too is an outspoken critic of traditional mutual funds. In an interview with SmartMoney, he said that the mutual fund investor puts up 100 percent of the money, takes 100 percent of the risk, and earns only 20 percent of the gains—if there are gains. The mutual fund companies take 80 percent of the profits via fees and expenses. To make matters worse, in 2009, because so much cash has flowed out of the stock market, mutual funds are beginning to raise fees and expenses. This means more cash flowing out of investors' pockets.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Mutual funds are simply an unintelligent investment designed for the financially unintelligent.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

On top of that, there are thousands of mutual funds, but less than 30 percent of them actually beat the S&P 500. In other words, all you have to do is invest in an S&P Index Fund and you will beat over 70 percent of all mutual fund managers - all with less money and higher returns.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

A mutual fund by definition is already diversified—in paper assets. It is a fund made up of a diversified group of stocks. To make matters worse, there are more mutual funds than individual stocks. Therefore, many mutual funds contain the same stocks. A mutual fund is like a multiple vitamin. Buying three mutual funds is like taking three multiple vitamins. You may take three different pills, but in the end you are taking many of the same vitamins—and possibly even overdosing on those vitamins!

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

In 2009, one of the biggest problems facing mutual fund companies is outgoing cash flow. Today, many mutual fund companies are having trouble raising enough money to pay investors who are leaving. Investors are now finding out that most mutual funds are legalized Ponzi schemes.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich