Mutual funds are both a blessing and a curse, in a way the expression " you can't live with 'em and you can't live without 'em " suits most investors relationship with them. Recently, both American and Canadian regulators have investigated funds in regards to late trading, basically the fund companies are making money off the funds without the unitholders making any. And, what is worse is that many giants in the industry have been fingered as being the villains.

What is a poor investor to do? Well, really not much. It’s a question of choices. Most of us don't have a lot of choice other than the mutual fund - yes I can hear the rumble from true indexers saying buy the index! And, that is really the only other alternative to the mutual fund industry at this point. But there are disadvantages to the index approach, when the index languishes, so will index funds. Well chosen mutual funds may well do better in poor market conditions - ask hedge fund holders over the past few years, or income fund holders, they have done quite well thank you.

Ultimately the decision is up to the investor, but more and more the key to investment success is the building of a portfolio and not necessarily the specific components of the portfolio. For example, if you have a portfolio that covers a broad range of industries, regardless of how that is done - whether via individual stocks or with a mutual fund mix, you will be able to weather sector related storms.

The advantage to mutual funds are not easily replaced, generally, they are fairly cost effective ways of holding a basket of stocks at a low entry price. Most of us don't have the necessary hundred thousand dollars to invest directly into a well balanced portfolio - this is the amount one would really need to create a diversified stock based portfolio in a cost effective way.

So, for better or for worse, we are somewhat stuck with the mutual fund industry and their shenanigans for now. But, I think for the mutual fund business's sake, the industry needs to smarten up as investors are not as complacent as they once were. When investors find an viable alternate option, they will move on - just look at the explosive growth in income trusts. People want alternatives, and once found they will embrace them "right now".