homo sapiens achieved an upright stance and looked about they spotted the new sparkling mutual fund. Fabulous. One-stop-shopping had come to the investing realm.
Crowds huddled-in on the magical Magellan Fund, run by Peter Lynch. Millions enjoyed, well millions McDonald’s style. Suddenly diversification came in a single bag, along with superior performance.
Scads of flimsy funds sprouted.
But soon fees also came in bags, along with savage under-performance. Any former glory vanished, leaving the space a cracked weed-riddled parking lot.
Investors play to be paid. They soon enough realized that they weren’t being paid. Now here’s the rest of that story.
“Oh, you can’t buy or sell in active hours–gotta wait for the native asset value. Want fries with that NAV?
Bogle, the founder of Vanguard–inventor of the index fund, has said it a thousand times. 401K fees will rob you of as much as 65% of returns over time. It’s your money, your time, 100% your risk, and you get 30% for your trouble. Actively managed mutual funds produce about the same results. Mutual funds are like fast food. Think twice before ordering.
Anyone inside the fast food industry will tell you–“I wouldn’t eat there. I’ve seen what happens behind the counter?” Well, yes. Speed kills and gravity is always at play.
Few Americans missed the beating dished out by the “Great Recession.” The galloping destruction of so many by so few should serve as a once in a lifetime wake-up call. Wall Street does not care about you, or America. Even more troubling is the piece-by-piece dismantling of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010. Soon if not already, we will be in a position where it can happen all over again. All one has to do to glimpse the risk is to listen to our complacent congress.
Just listen to their proclamations. Most congressmen know about as much about the economic impact of any tax change, as they do about putting something into Earth orbit. Add to that the fact that every tax plan cooked thus far, was cooked in secret, solely by GOP chairs, and never released to the people voting for them. Never mind that the entire effort has been handled “on the fly.” Is that thoughtful leadership?
While half of our congress flails in total darkness in search of a victory, Wall Street is propelled by the financial version of crack heads. These are people who would strip you stone naked and leave you freezing in a back alleyway. Opps, that’s what they did.
Goldman’s preferred ally, somewhere in Asia. If you went to Goldman, and wake up here, check for both kidneys.
We began StockJaw as a resource for non-Wall Street people. At what point is it appropriate to label something? Can we fairly label the street as criminal? Yes. Can we conclude the street’s run by pirates? Well, yes.
This guy knows more about what’s shoved over the counter than management. If he doesn’t want to be here, and wouldn’t eat here, would you?
In the resultant wreckage of the crash, reports surfaced that demonstrated Goldman Sachs steer individual invsetors into derivatives based on mortgage-backed “securities.” Ballonga in other words. At the same time Goldman was systematically betting against these derivate products, because they knew the products would fail. Yet people still go to Goldman for personal wealth management.
Today one might look to the Indian Ocean to locate active pirates. Or one could visit Edward Jones. They love mutual funds, and every possible form of fee and sales charge. Edward Jones is the quintessential “hand-holder.” They calm and sooth and charge. StockJaw.com’s new CCR’s(Conference Call Ratings) are designed to highlight which companies help, and those who hide. Visit edwardjones.com and search for straight info on fees and charges.
Five clicks later you’ll find yourself at the Financial Industry Regulatory Authority’s website. Once back, call and ask them directly about their “contingent deferred sales charge.”
EJ endlessly pimps American Funds, some of the most bloated funds available anywhere. For significant periods they made up 5 of the largest 10 funds in America. Many of their funds have done well, yet retail shareholders will never see the lions’ share of gains. What equity research? Forget online reports. They’ll print it for you. You see, they’re still all paper. It’s about control, their control, not yours.
“Gently-used mutual fund. Bloated and expensive. Holds all kinds of crap you don’t want. Great for fund managers, and their families. It’s yours, if you can stomach the mind-bending maintenance, management, and trading fees, and clear it off the beach. Might need an oil change.”
Savor our heartless drill-down on that groovy retail investing tent;
“That Groovy Retail Carnival.”
Huge wallowing mutual funds are hard to manage, and slow to turn–like super tankers. If your mutual fund as billions, it’s too big. Money management requires good ideas. The more money on a manager’s hands, the more good ideas needed to deploy said cash.
In addition to profit-crushing and unjustifiable compounding fees, managed funds suffer from three crippling problems.
1. Compensation. Fund managers are normally compensated as a percentage of “assets under management.” Fund performance comes far down the list.
2. Selling the fund itself is the primary focus, again not actual fund performance.
3. Institutional hand-holding. Fund managers must placate their biggest shareholders. When CalPERS(the largest U.S. based institutional investor) has questions concerning fund activity, the fund manager is called to account. This again removes focus from investing to explaining. This constant scrutiny, often by people less knowledgeable or savvy, forces fund managers to remain within conventional equity picks, rather than truly hunting for untapped growth or value prospects.
Once hailed as “the best investment idea ever, the actively managed mutual fund is waning. Actively managed funds make about as much sense as paying a front, or back, end load.
ard Jones also will tell you, promptly, to pay the 5.75% front-end load. That means the investor begins her account deep in a hole. Guess how much they charge for equity purchases? Keep looking.
Images sourced from Pixabay.
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