In the following video, Fool contributor Matt Thalman discusses one reason investors should avoid buying mutual funds and stick to an index fund. While Matt believes there are a number of reasons the individual investor should avoid mutual funds, today he focuses on management.
As Matt sees it, with index funds, management doesn't play an active role in managing your money. Only when the S&P 500 takes a stock out and replaces it with another would the fund manager need to perform the same trade. But when it comes to mutual funds, managers decide which stocks should be purchased and sold, and when. That human element adds risk to the already inherently risky world of finance.
For more, check out the video.
Fool contributor Matt Thalman and The Motley Fool have no position in any of the stocks mentioned. Check back Monday through Friday as Matt explains what caused the Dow's winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter: @mthalman5513. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.