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401(k) Plans
I’ve been in and interested in the stock market so long (one year shy of forty years) I can remember when the mutual fund pages in my home town paper were just one page! Now it looks like there are more mutual funds then there are stocks listed on...
Do Lifestyle funds provide greater security?
With the stock market stubbornly refusing to settle down and smooth out, Wall Street has been scrambling to come up with "product" they can sell to gun shy investors. One such new concept is the Lifestyle fund; an extremely diversified package...
Forex Trading: How To Create Fantastic Wealth From Forex Trading
If you search on the internet you’ll find millions of investment programs such as real estate, stock trading, bond trading, mutual funds, CDs, auction programs and various internet programs.
I have not done many internet income opportunities or...
Penny Stock Strategies
Why should the rich guys have all the fun? The small investor
can seek out huge returns too...if they know how.
Technical analysis that uses statistics for forecasting price
fluctuations is one approach. However, because it is difficult
to...
The danger of buying shares
The danger of buying shares
Bright Johnson
Shares are sold everywhere in the world. From New York to Japan, there are huge stock markets filled with people’s money.
Why do people buy shares? Of course, they want to make money. But do people...
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WHAT THE SEC REALLY THINKS ABOUT MUTUAL FUNDS!
Let’s go into the details of why non-indexed mutual funds are such a bad deal. When Arthur Levitt became the head of the Security Exchange Commission in 1993 he had to sell off all of his individual stocks so that people would not claim that he was doing any dirty inside dealing. He decided to put the cash from selling off his stock portfolio into mutual funds.
Mr. Levitt grew very angry when he tried to decipher how particular mutual funds divvied up their cash into specific stocks. He couldn’t make heads or tells from the fancy brochures of the mutual funds called prospectuses. He had been a major player in the stock brokerages for over 25 years at that point and knew that if he couldn’t understand the mutual fund’s prospectus then he knew public investors couldn’t either; it had to be a big scam to suck money out of the public.
In 1980 the US public invested $100 billion into the 500 mutual funds that existed at that time. By 1993 the public put $1.6 trillion into the more than 3,800 mutual funds that existed in that year; talk about growth! By the end of February 2003, at the bottom of the bear market there were 8,200 mutual funds and the public had pumped in $6.3 trillion dollars. Wow! That is a lot of money. What is important to note is that at least 40% of mutual fund money comes in from 401(k) retirement accounts. Today these mutual funds own about 20% of all publicly traded shares of stock. Mutual funds act like a herd of cows
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buying and selling the same stocks at the same time. This increases the wild price volatility swings in the stock market.
These funds are also sold and managed on pure hype, short term trading, and with key information withheld from the public. All of these factors I teach finance students and investors to avoid! The industry confuses investors by focusing on past performance, which should not be a factor to consider. Many mutual funds are able to cheat the public with excessive fees because investors don’t understand how these big costs destroy their profit. Mutual funds have no interest in educating investors because it is easier to hoodwink the ignorant!
Don’t put your trust in mutual funds unless they are fully indexed. Indexing means that the mutual fund simply uses a computer to buy and sell stocks in the mutual fund portfolio so as to mimic the composition of a major stock market index like the S&P 500. This means that there is no fund manager sucking out needless fees. A good example is the first fully indexed mutual fund called the Vanguard 500 (VFINX) which is also now the largest of its kind.
About the Author
ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., the Wallet Doctor, is a successful investor. Dr. Brown holds a Ph.D. in finance. The Wallet Doctor is sought after for investment advice and coaching. For more information visit Dr. Brown’s site at www.BonanzaBase.com or sign up for his investment tips at www.WalletDoctor.com
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