Cutting Edge: How NOT to Invest in a Mutual Fund

Do a reality check on financial product offerings coming into your community

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I never quite understood how subprime lending was able to ravage so many communities until recently. I attended an investing workshop in Brooklyn, New York. The presenters were from a company called Goal Mine and, along with teaching about how to invest, they used us as a focus group for an investment product not yet on the market.

The beginning of the workshop went smoothly. After we received hearty slices of pizza, the presenters passed out little cut-outs that resembled AMEX and VISA gift cards that you can purchase from CVS pharmacies. The offer: What if these cards were sold at a cost of about $3.75 and redeemable for $25 to put toward a mutual fund?

“So you don’t need a bank account to set up an account or invest in mutual funds?” I asked.

“NO!” replied the young female presenter excitedly, and then explained that this was the “beauty” of the service. Even if you didn’t have a bank account to transfer the money from, you could simply purchase one of these redeemable cards to put toward the investment.  My first thought: If you don’t have a bank account, you should not be investing in mutual funds. In order to invest, it’s important to first understand the fundamentals of money and money management, something most people gain an appreciation of through maintaining a bank account.

“Many people in impoverished areas are called ‘unbankable,’” says Dorethia Conner, a personal finance coach out of Warren, Michigan. “These are people who do not qualify for conventional lending and end up paying much higher interest rates when they are approved for loans. They may not have bank accounts, may operate cash only, or use Rush Card [prepaid debit card] types of services.” The unbankable segment of the population is especially attractive to certain lenders and institutions.

Conner urges anyone thinking about investing to first start with the basics.  If you don’t have a regular savings account because of monies owed, “pay the bank off so you can open an account.”

With the service Goal Mine would provide, customers would be able to go online, create a profile, and establish a savings goal (e.g., a vacation, car, home purchase). Then Goal Mine would match you

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    This information was very helpful to me. Thank you. I’m looking to make some investments, and really and truly dont know where to start. So to say the least, this information was HELPFUL


    Should I go to a bank to start my investments, or should I go to an Invester? And if so, who would you recommend?

    • Renita Burns

      First, get an understanding of your financial landscape. How much money do you have to save? How much do you have saved? How much do you have to invest? What is your monthly income? What are your short and long term financial goals? Don’t answer these questions here, but jot them down. Of course, continue reading, but also check out, and those are three of my favorite money sites. If you don’t have any money saved consider opening a money market account. has great research and education tools as well. Hope this helps. Educate yourself because too many people lose their money by solely relying on others to do the work.


        Renita, I’m learning about investing and your reply is very helpful. Thanks.

  • A bank that matches inexperienced investors with mutual funds sounds like an interesting way to charge hidden fees to investors who are the most vulnerable. Five out of 10,000! How did they chose the funds? Some backroom deal? Perhaps they even sponsor them!

    If banks were sincere about this effort, they would offer a low-entry cost indexed certificate of deposit.  These are usually short-term and are tied to the stock market in such a way that the investor never loses their money and has the chance to make a sizable return if the index the CD tracks does well.  It woud be an excellent way to give some investment experience to those that are the most mistrustful of financial institutions and with good reason. 

    Don’t get me wrong, I love mutual funds.  But they are what you bring to them and if you have had difficulty managing your own money, you can’t expect to be watchful over someone else.

    In your list, number 4 should be 1st.

    • Renita Burns

      @ Target2025, great information. I agree, if you still can’t manage a bank account, learning to manage a mutual fund or at least pick the right fund for you seems far off. The problem is this program targets people who want to learn more but do not have enough financial knowledge. When it comes to managing your money, even with an advisor, we all need to be astute and aware of what is going on…re: Madoff