Three Common Mutual Fund Misconceptions Debunked

An older man looks at his laptop in his living room while his wife reads on the sofa in the background.

A few times a year, whether in the financial press or from clients and prospective clients, we encounter comments about mutual funds that contain misconceptions. There are three more-frequent misconceptions that I would like to clear up and purge from investors’ memories.

To establish a foundation, it’s essential to understand that a mutual fund, at its core, is a “wrapper,” or an investment structure that allows many individual investors to pool their money to invest in a basket of securities. Instead of buying many individual securities on their own, investors invest in shares of a mutual fund to gain exposure to these securities with one purchase. Buying shares of a mutual fund allows for easier diversification among many securities.