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There are lots of fund myths out there. The reality is that funds are the best investment vehicle for the vast majority of investors. The key is to have a logical process when selecting funds.
What are investment funds?
The first rule of investing is not to lose money. Diversification helps achieve this and funds offer "instant diversification." The alternative is to buy at least twenty individual stocks; a research intensive endeavour.
Investment funds pool the assets of individual investors. They generally rules in place to ensure they remain sufficiently diversified. It wouldn't be possible, for instance, to put all of a fund into a single company.
When funds are criticised by the media and academics they are referring to "active funds." These seek to outperform a benchmark and often fail to do so. Passive funds seek to match their benchmark rather than to outperform it.
Slaying fund myths