I know that the majority of mutual funds out there are garbage, but as consumers we get to review all the information about each fund and make our decision based on this.
There are some very very smart people on Wall Street and to utilize their services for part of your portfolio is a wise move for most.
Let's look at the market averages for 2005:
Dow <font color="red">-0.61% </font>
Nasdaq +1.37%
S&P +3.00%
Now let's look at the largest 25 mutual funds in this relatively flat year for 2005 returns.
<ul type="square"> [*] American Funds Gro;A
14.23%[*]Vanguard 500 Index;Inv
4.77%[*]American Funds ICA;A
6.87%[*]Fidelity Cash Reserves
2.93%[*]American Funds Wsh;A
3.55%[*]Fidelity Contrafund
16.23%[*]PIMCO:Tot Rtn;Inst
2.86%[*]Fidelity Magellan Fund
6.42%[*]Dodge & Cox Stock
9.37%[*]Vanguard Prime MM;Inv
2.99%[*]American Funds Inc;A
3.14%[*]American Funds CIB;A
4.46%[*]American Funds EuPc;A
21.12%[*]Schwab:Money Mkt
2.54%[*]American Funds CWGI;A
14.72%[*]Vanguard Instl Indx;Inst
4.91%[*]Vanguard 500 Index;Adm
4.87%[*]Fidelity Lw-Prcd Stk
8.65%[*]American Funds NPer;A
11.28%[*]American Funds Bal;A
3.12%[*]Fidelity Gro & Inc
2.71%[*]Fidelity Dvsd Intl
17.23%[*]JP Morgan:Prime MM;Cap NA[*]Vanguard Tot Stk Idx;Inv
5.98%[*]Vanguard Windsor II;Inv
7.01%[/list]
Eliminating the MM funds and international funds 15 beat the S&P while 4 did not.
The average of these 19 domestic funds was 6.03% gain, handily beating the market.
While there are alot of "bad" fund managers and they get alot of press, i.e. a handful SEC investigations, some analysts tripping over themselves with outrageous claims during the tech boom of the late 90's (i.e. Amazon.com going to $1,000!), there are alot of fund managers to utilize that are brilliant in what they do.
I guess my message is don't be ashamed if you invest some money in mutual funds as there are some great ones out there! It is just another tool to make your money work for you.