Ask any Stockbroker which type of mutual fund is best and youll likely hear Well, you want me to get paid, dont you? and youll be shown a list of mutual funds with sales loads attached (Does this sound like an Edward Jones stockbroker anybody?) which will probably include some American Funds and maybe a few Putnam or Lord Abbett funds thrown into the mix [NOTE: Sometimes the loads are hidden by showing you B shares, or funds that have no up-front fee, but charge a redemption fee for several years].

Ask any Registered Investment Advisor (RIA) and theyll likely tell you We dont care if its a load fund or a no-load fundwe only want to find you the BEST mutual fund and well make sure the load is waived (This is what youll hear if you go to any of Adam Bolds Mutual Fund Store franchises and ask for a review of your portfolio). Of course, theyll only charge you a small fee (usually in the range of 1% to 1.5%) each year in order to watch over your portfolio and help you with allocation.

Call Fidelity or Vanguard or Schwab and ask which funds to buy and theyll tell you We have a large list of no-load mutual funds from which you can choose and point to you a list of hundreds if not thousands of mutual funds that have no up-front fee. Of course, theyre making money somewhere, right?

Of course they are.

All financial services companies whether mutual funds, stockbrokers, banks, insurance companies, or whatever all seek to make money, and many do so quite handily. The typical profit margin for any of these types of financial companies including mutual funds is between 1% and 2%. If a company is well-run without a lot of bells and whistles, then they can be profitable on a smaller percentage.

Vanguard set the stage for low fees by offering numerous index funds with extremely low costs. Of course, the costs SHOULD be low, since an index fund has virtually zero management necessary just buy the stocks in the index.

So which type of fund is best?

Regardless of what Adam Bold says on his Mutual Fund Show (and regardless of what all of the investment advisors at the 70 Mutual Fund Store locations say), it is rare for an actively managed fund to consistently beat the index that it is attempting to beat. Since the S&P 500 index consistently beats somewhere between 70% and 80% of all actively managed mutual funds (depending on the time-frame youre examining), why do you think that this is going to happen for you?

Buy the index and save the fees! More importantly, have a plan and follow your plan. This may end up being the most important step you can take when it comes to your mutual fund plan.