Objective Financial Planning LLC

Ever want to take control of your own investments vs. relying on a mutual fund manager who is controlled by the mutual fund company?  This was not an option just a few years ago because transaction costs were too high and it was not economical feasible.  Therefore a mutual fund served a purpose by allowing you to gain access to many stocks without the commissions of buying each stock by itself.  Internet trading has changed the landscape of investing in many ways.  Now you can actually buy a handful of stocks at less cost than the management fees charged by mutual funds.  Advantages of creating your own mutual fund include:

• Tax Management - You control when you have capital gains, not the mutual funds who have to pay out capital gains as a result of the fund managers buying & selling as well as forced selling of stock positions through investors redeeming shares (i.e. what happens frequently in a bear market).
  
• Lower Cost - The average 'active' mutual fund charges about 1.2% to try and beat the market (or specifically the index their fund is categorized to be in).  By stripping away this cost, it is not only going to save you money each year in expenses but it makes all of your costs transparent (in a mutual fund, you do not get a bill for this 1.2% and it is not shown on a statement as it comes directly out of your returns).  In most cases, the cost of creating your own mutual fund through individual stocks includes $7 to buy or sell company stock along with a 0.50% management fee to Objective Financial Planning.
• Downside Protection -Stocks have a definitive advantage in that you can put all sorts of stipulations on your buy and sell orders.  There are limit orders, market orders, stop loss orders, stop limit orders - all of which have their place.  But the most important is the stop loss order where you can limit the downside of your investment in a company.  You can actually put a price of a share or a percentage of loss that would trigger a sell order which would 'limit' how much you can lose on your investment.  This is not an option for mutual funds which are priced at the close of each trading day.
• Return on your investment - Mutual funds typically have over 100 individual stock holdings which make it increasingly difficult to stand out from the index they are trying to beat.  In order to do so, they must have a few outstanding picks while having less that tanked.  By creating your own mutual fund with no more than 15 individual stock holdings, your potential for market beating returns clearly increases.
• Ethics - By no longer investing your money with a 'for-profit' mutual fund company, it eliminates the question of stewardship that has troubled the industry over the last decade.  Independent boards, passing transactions costs from some active investors to you, whether fund managers actually invest in their own fund, funds more concerned about pulling in more investment dollars than investor returns, etc. are not an issue.