What The Sec Really Thinks About Mutual Funds!
By Dr. Scott Brown, Ph.D., Thu Dec 8th
Let’s go into the details of why non-indexed aresuch a bad deal. When Arthur Levitt became the head of theSecurity Exchange Commission in 1993 he had to sell off all ofhis individual stocks so that people would not claim that he wasdoing any dirty inside dealing. He decided to put the cash fromselling off his stock portfolio into mutual funds. Mr. Levitt grew very angry when he tried to decipher howparticular divvied up their cash into specificstocks. He couldn’t make heads or tells from the fancy brochuresof the called prospectuses. He had been a majorplayer in the stock brokerages for over 25 years at that pointand knew that if he couldn’t understand the mutual fund’sprospectus then he knew public investors couldn’t either; it hadto be a big scam to suck money out of the public. In 1980 the US public invested $100 billion into the 500 mutualfunds that existed at that time. By 1993 the public put $1.6trillion into the more than 3,800 that existed inthat year; talk about growth! By the end of February 2003, atthe bottom of the bear market there were 8,200 andthe public had pumped in $6.3 trillion dollars. Wow! That is alot of money. What is important to note is that at least 40% ofmutual fund money comes in from 401(k) retirement accounts.Today these own about 20% of all publicly tradedshares of stock. act like a herd of cows buying andselling the same stocks at the same time. This increases thewild price volatility swings in the stock market.
These funds are also sold and managed on pure hype, short termtrading, and with
THE NO LOAD MUTUAL FUND TRACKER
Do you have a question regarding your mutual fund investments? I will always give you my unbiased and honest opinion. How can you be sure? First, this is a free newsletter and it will not affect my renewal rates. Second, I am not running for office and do not have to hide my thoughts in evasive language designed to obscure what I really mean.
key information withheld from the public. Allof these factors I teach finance students and investors toavoid! The industry confuses investors by focusing on pastperformance, which should not be a factor to consider. Manymutual funds are able to cheat the public with excessive feesbecause investors don’t understand how these big costs destroytheir profit. have no interest in educatinginvestors because it is easier to hoodwink the ignorant! Don’t put your trust in unless they are fullyindexed. Indexing means that the mutual fund simply uses acomputer to buy and sell stocks in the mutual fund portfolio soas to mimic the composition of a major stock market index likethe S&P 500. This means that there is no fund manager suckingout needless fees. A good example is the first fully indexedmutual fund called the Vanguard 500 (VFINX) which is also nowthe largest of its kind. About the author:ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., the Wallet Doctor, isa successful investor. Dr. Brown holds a Ph.D. in finance. TheWallet Doctor is sought after for investment advice andcoaching. For more information visit Dr. Brown’s site atwww.BonanzaBase.com or sign up for his investment tips atwww.WalletDoctor.com |
