Mutual funds are one of the most important innovations of all time for individual investors, allowing them to obtain wide diversification and professional investment management at reasonable cost. That makes it the more shameful that large portions of the mutual fund industry continue to exploit shareholders with excessive costs, while delivering below-average returns. Some fund companies offer very inexpensive products. […]
Financial con artists prey on greedy investors
Greedy investors and savers who seek low risk and unrealistic returns face big risks of being defrauded. As the stock market enters its third year of declines and former stock investors search for “safer” returns, it is likely that more fraudulent alternative investment schemes will pop up, state and federal securities regulators warn. The recently resurrected case of fraud at […]
Hidden warnings of danger in your 401k plan
The collapse of the Houston-based energy trading company Enron has demonstrated that a seemingly benign 401k retirement savings plan may be dangerous to your financial health. Enron’s collapse virtually wiped out the retirement savings of many employees whose 401k account balances were largely invested in the company’s stock. Individuals with accounts that were once worth hundreds of thousands of dollars […]
Does the market have to rise? Not really
There has been a lot of speculation in recent months that 2002 will be a good year for the stock market. Why? Because 2001 and 2000 were both losing years, and the market rarely has three losing years in a row, many pundits have argued. This argument is probably wrong on several counts. For one, the stock market’s current results […]
Client Letter – Q4 2001
We all like to believe there is a Holy Grail mutual fund out there that will deliver huge returns year after year without fail. That belief feeds into the marketing of mutual funds—advertisements that sport huge recent returns listed in bold letters lure investors to high-risk funds whose time is often past. It also provides fodder to the publications that […]
Fund investors earn lower returns because of excessive trading
Mutual fund investors are hurting themselves by trading their funds too frequently and buying at the wrong times, concludes a study of mutual fund cash flows by Gavin Quill, senior vice president of Financial Research Corp. in Boston, Mass. Quill studied the flows of money into and out of stock and bond mutual funds during the 1996 through 2000. He […]
Mutual fund concentration
Over the past month the stock of Enron Corp., one of the largest U.S. stocks, has been virtually wiped out as the energy trading company unraveled. Although many mutual funds hold the stock, a few will be particularly affected because they held big Enron positions. Three Janus funds—Janus Two, Special Situations, and Orion—and the Merrill Lynch Focus Twenty fund had […]
Use investment losses to cut your taxes
Sure, it’s been a miserable couple of years to be a stock investor. Since the euphoric market highs of March 2000, the stock market has been subject to frequent, gut-wrenching declines, culminating in the sell-off that followed the tragic events of Sept. 11. A long-term investor who is diversified and focused may feel the pain, but knows he shouldn’t make […]
The Motley Fools are living up to their names
A big Internet phenomenon during the glory days of the stock market in 1999 was the Motley Fool website. The irreverent site was started in 1997 by David and Tom Gardner, two 30-something brothers out to show just average folks that they could beat the investment professionals and the markets with simple investment strategies. They touted stock picking as fun […]
Refinancings spur a dangerous spending spree
The stock market is down, major corporations are slashing costs and employees, and yet consumers continue to spend, spend, spend. How do they manage to keep going? Economists say much of the spending boom is due to a huge wave of mortgage refinancing. Homeowners are taking advantage of a recent spurt in housing prices and lower interest rates to refinance […]
