Mutual Disrespect

It's true, there are more managed mutual funds out there than Big Board listed stocks. These investment vehicles, which pool money together under a money manager, have grown in popularity as the market has risen.

But are mutual funds Foolish? One would think, given the tools available to control one's financial future, that an informed investor would have no need for this fiscal wading pool. Surely all Fools can agree, right?

Wrong. This week Rick Munarriz (TMF Edible) and Paul Larson (TMF Parlay) come to mutual disagreements over mutual funds. Rick thinks there is always room for some managed mutual fund diversity in every portfolio. Paul thinks his fellow Fool has gone loco.

Fund Fight! Tonight! And a ringside seat awaits...

You Get to Vote!

After reading all of the arguments, cast your vote for the winner of the Duel. We'll tabulate results each week and revisit them from time to time to see whether you were right! As always, we invite you to join us in the Mutual Funds Message board to continue the duel.

[Any suggestions, comments, praise, or flames, please send them along to the Dueling Fools Team.]

The Bull... Defending managed mutual funds? Right away, you are probably against me. Why learn to ride a bike only to screw back on those training wheels? They are cumbersome. They scream Novice. They hinder performance. I hear that, but I still won't sell my shares of Mutual Discovery or Heartland Small Cap Contrarian. Why should I? Because most mutual funds lose out to the unmanaged S&P 500 Index? This just in: There has never been an index fund to match, much less beat, its respective benchmark. Sure, they usually trail by just a few scant basis points a year, but if you enjoy the fact that 91% of all mutual funds underperform the S&P 500, do not take solace in the fact that 100% of all index funds fail as well. Continue...

The Bear... I am the type of Fool who likes to boil issues down to a few points that are as simple and as concise as possible. Boiling down all the facts about mutual funds reveals something interesting at the bottom of the pan once all the hot air and vapor are gone. That something is a single fact that is easy to understand and should make any investor think twice about putting his hard-earned cash into managed mutual funds. What's that fact? The fact is that more than 90% of all mutual funds have lost to the major market indices over the past five years. Continue...

Results for last week's Schwab Duel

Answer	Percentage
I can't make up my mind	5%
Dale Wettlaufer's Bull argument	48%
Rick Munarriz's Bear argument	37%
They were both excellent	8%
They were both lame	2%