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Part: 5 Building Wealth: Choosing the Right Asset

Part 5: Building Wealth: Choosing the Right Asset

Part 5 brings us to the bottom line: How should investors make important investing decisions concerning mutual funds and the alternatives to mutual funds? We have now examined the many benefits of mutual funds and considered some of the potential problems that can arise when buying and owning them. We have also reviewed the three major alternatives to mutual funds that have recently emerged and captured some attention. Now we are ready to draw some conclusions.

We first examine the basic issue of how investors build wealth over time. This helps investors to better evaluate the role of any investment alternative they might be considering. We then review the overall case for mutual funds. They remain the major financial asset of choice for many investors, and this is not going to change anytime soon.

Mutual funds can be used effectively by many investors. The trick is knowing what investors can reasonably expect to accomplish with mutual funds. If investors understand the critical issues, and deal with them successfully, much can still be accomplished with mutual funds. We examine how index funds can be used successfully by almost all investors.

Regardless of the strong case for most investors to own index funds, many will continue to opt for actively managed funds. Therefore, we analyze some issues that investors need to carefully consider when choosing an actively managed fund.

Finally, we recognize the possibility that mutual funds might not be the best solution for some investors in today's world. As we have seen, mutual funds have their problems. We review when and how to choose one of the three alternatives discussed in this book: ETFs, folios, and separately managed accounts.



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