Why I2Guru is Not a Fan of Mutual Funds and ETFs

Mutual Funds and ETFs are now the most popular way of investing. This blog looks at the history of funds, when they are suggested, and why they are not.
-I2Guru, April 13, 2025

Disclaimer: Before doing anything this article may inspire, consult a tax and finance professional.

Mutual funds have been around a lot longer than most people think. Mutual funds originated in 1774 with Dutch merchant Abraham van Ketwich, who pooled investor resources to reduce risk. The concept spread to Europe in the 19th century and arrived in the U.S. in 1893, where the Massachusetts Investors Trust in 1924 introduced the open-end fund model.

In the more modern era, the Post-World War II economic growth and retirement accounts like IRAs and 401(k)s further popularized mutual funds, becoming key investment tools. Regulatory milestones like the Investment Company Act of 1940 ensured greater transparency and protection for investors. Then, the big one came: the S&P 500 Index Fund created by John C. Bogle. He was the founder of the Vanguard Group. It made a lot of sense in that it gave the average person a means to get into the market without the complexity of the manual processes of that era.

Fast forward to 2025 - you now can buy partial shares, get real time quotes, and trade in milliseconds with your phone. You also can research every aspect of every company yourself in seconds - on this site alone.  In turn, I2Guru's sees that Mutual Funds and ETFs are nothing more than middle-man, profit-skimmers in this day and age.  Think about it, you'd never have a middle-man between you and putting money in your savings account. You also forfeit extra monthly income from Fully Paid Lending programs.

My guidance to my son is that once he has at least 20K in his 401K, he should pay the extra $100 per year to allow for self-directed trades.  Also, if he were to change employers, he should strongly consider rolling over his 401K to a Traditional IRA brokerage account like E*Trade. This will give the full power of trading without any fees or skimming of his investments. He can then set his positions to best optimize against the different seasons of investing.  He will also be able to sell at market highs to current value-based assets with reliable dividends.  Basically, trade like the Oracle of Omaha versus follow the sheep.

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