'Sell all your mutual funds and stop being ripped off'.
Here is the link to this article http://www.marketwatch.com/news/story/sell-all-your-mutual-funds/story.aspx?guid=%7B4B8CD1AC%2DE5B4%2D46E0%2D9C24%2D03B45347A67F%7D
Basically, the author says that the fees they charge are not justified by returns. He also goes into a rehash of the mutual fund scandals of a few years back. He suggest index funds (ironically, offered by mutual funds) and ETFs. With these investments, the embedded fees are low (not including commissions charged at the point of sale). The case could be made that in these index-type investments, you get what you pay for. Owning an S & P 500 index fund maybe great for low expenses, but does it fit with your goals?
The point here is to get a hold of some sound advice. Work with an advisor and develop an investment policy statement, outlining your goals and objectives while taking into account your risk tolerances. Planners and advisors charge for the value of their information. If they do a good job, as defined by your investment policy statement, they should be compensated a fair amount. Mutual funds may be part of this mix, in some cases they may be the only way to get involved in certain sectors. However, take the time to understand the all the costs and loads involved.
Finally, mutual funds may be the best way to execute an investment policy. For example, if your total investable funds are only $50,000, you probably can't get financial planner for a reasonable fee (many have minimums). Putting together a diversified portfolio of investments may not be possible without use of mutual funds. Be mindful of the costs. If professional help is not practical, draw up your own honest and common sense-filled investment policy statement, delineating what you are trying to do and what you are willing to do (how much risk are you willing to take on) to get there. Stick with it, refer to it, and update it from time to time as needs goals, and risk tolerances change.
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3 comments:
Mutual Funds are a great way forst venture into the investing wilderness. They are also a great way if you haven't found an adviser who you trust or with whom you feel comfortable. This is becoming an increasing problem
As the older well-rounded advisers retire, they are being replaced by a new breed of asset gatherers. These advisers are taught much about customer care and little about the capital markets or economics. They ae being encouraged by firms to take in the assets, place them with manages who gave "good track records" and to move on to gather more assets. If the money manager makes poor investment choices (I have seen managed accounts which left me scatching my head), the advisers is taight to paint himself of herself as a victim of the manager and will work with the client to choose another manager.
I have spoken with brokers who actually defend the practice of choosing a manager and not need knowing in what securities or strategies money managers are engaging. My advice to investors who meet up with advisers who know little or nothing about the markets, economy, investment products or even what a manager is doing and why to run (don't walk) away from that adivser. One can choose funds based on past performances themselves and save the commission.
This is not to say that one should attemot to go it alone. As you correctly point out, a good knowledgeable adviser is worth every penny and deserves to be compenstaed. The problem is that they are becoming an increasingly rare breed.
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Right!
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