We are often asked why we use individual stocks and bonds instead of mutual funds in client portfolios. One answer has to do with size. If you have, say, a few thousand dollars to invest, a mutual fund is great for diversification. But a larger portfolio, anything over $250,000, can achieve adequate diversification on its own without the cost and complexity of the mutual fund format. Consider that there are more mutual funds than there are stocks and bonds; how do you know which one to pick? You might do it on the basis of expense, but how do you know what the real expense is. Consider that a high rate of portfolio turnover, that is to say a lot of buying and selling, can generate transaction fees that are next to impossible to discover. An article in today’s Wall Street Journal speaks to this problem of hidden expense.