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In my country, the banks always package mutual fund as a "safe", "diversified", and yet potentially "high return" investment as oppose to buying a stock.

Most of the time, they will use the following line when trying to sell you a mutual fund:

You paid a professional fund manager to manage the fund for you, that's why it is safer and better than buying stocks on your own.

Are fund managers really responsible for ensuring the mutual fund performance is not too bad? Or they can just keep their job as usual regardless whether their mutual fund could beat the SP500?

If they are not responsible for making sure the fund performance is good, then isn't buying a mutual fund equivalent to paying a guy to potentially lose your money?

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Fund managers employed at financial institutions are as liable for the quality of their work as any employee is. When they perform poorly (but not so poorly that intentional maliciousness can be proven), then they might lose out on bonuses and commissions (if that's in their contract), but the worst that can happen to them is that they lose their job due to incompetence.

However, what the company does put on the line when offering managed funds is their reputation. The long-term performance of managed funds is usually public information. When the managed funds from Philipp Investment Inc. consistently perform worse than the index, then investors will notice and look elsewhere.

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  • Also as a consequence of investors withdrawing their money, funds with poor performance with be closed. Which is why there are so few really bad mutual funds
    – Manziel
    Mar 19, 2021 at 10:03

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