You'd have had to be living on a desert island with no TV, newspaper or internet connection to have missed hearing about the great mutual fund scandal of 2003.
The issue was that some mutual fund companies allowed certain hedge funds to engage in after-hours trading, sometimes incorrectly referred to as market timing. Unfortunately, some companies have used the confusion about the term "market timing" to further their own cause. How?
They have used this issue to pretty much ban all forms of trading their funds, and some companies are imposing hefty short-term redemption fees-penalties for all intents and purposes-in the name of avoiding impropriety. But the real idea behind it all is: Buy our fund and never sell it!
These companies advocate a stubborn Buy & Hold philosophy despite the devastating effects that approach had on investors' portfolios during the recent bear market. Performance is immaterial to them-they want your money in their fund whether it's going up or down.
With all of the negative press over the months you'd think that mutual fund companies would have cleaned up their act and started giving more consideration to the individual investor. Not so.
This was brought home to me when a fund manager of an $800 million mutual fund called me to see what my plans were in respect to holding our positions with his fund (about $2 million).
I explained my trend tracking methodology and he got very angry when he heard I would protect my clients' accumulated profits by selling his fund if it were to drop 7% off its highs.
His blustering made it quite clear that he did not like anyone managing for the benefit of their clients; he only cared about what was best for him and his company.
So, what can you do to prevent being taken advantage of? For one thing, do what your mutual fund company does - not what they tell you to do. Adopt a strategy for following trends, such as I do, and use the mutual fund manger's superior stock picking ability to your advantage by buying and holding only as long as the fund is performing well.
Remember, the fund manager has one big disadvantage over you: He always "has to" be invested so that the public can purchase shares in his fund. You don't!
If market conditions dictate that you are better off in the safety of a money market account because we are in a severe downtrend, then you can take your money and run for cover. He can't. He is constantly trying to adjust his portfolio to ever-changing economic conditions so that his potential losses are minimized. At the same time you are being told that his fund is the investment for all seasons. Don't fall for it!
You as an individual investor are really in the driver's seat. Unfortunately, you have probably been conditioned to think that Buy & Hope is a good investment strategy, when in fact it is a losing proposition.
Bottom line is, use a well performing mutual fund during strong up trends and get over to the sidelines during trend reversals. (That's exactly what I did for my clients in October, 2001, and we retained the lion's share of their profits while Buy & Holders kept insisting the emperor was wearing new clothes.) Pretty soon you will feel that you are in charge of your financial destiny and any chosen mutual fund is merely a tool to bring you closer to your goals of maximizing your gain and minimizing your losses.
About The Author
Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: www.successful-investment.com.
custom home cleaning Wilmette ..All of the talking heads have been telling us that... Read More
The stock market has been going up for more than... Read More
Has your broker been calling you recently with the "great... Read More
Recently I was invited to appear on a live CNNfn... Read More
Starbucks earnings are up again and so is their stock... Read More
I mean it when I say that. While plastic silverware... Read More
Sometime in the third quarter of 1997, someone told me... Read More
It depends on your level of understanding of the market... Read More
The Shadow knows. There used to be a radio program... Read More
There is a current movie entitled "Eternal Sunshine of the... Read More
Every day on CNBC-TV they show a 200-day moving average... Read More
Index Fund Trading can be one of the most profitable...or... Read More
Do you have a financial planner? Does one of your... Read More
∙ Make every investment in the stock market a long-term... Read More
On the 40 year journey through the turmoil of a... Read More
(1) Stock Market is Tough Place to Make Any Money... Read More
Success in small cap & micro cap stock trading like... Read More
We all know the expression, "My country, right or wrong",... Read More
There are many important things you need to know to... Read More
This is the continuing story of our two imaginary traders,... Read More
Every stock market investor faces one primal enemy. An enemy... Read More
I am sure that if you have a brokerage account... Read More
Duck! No I don't mean a quack, quack. I meant... Read More
Reach in your pocket and take out that big roll... Read More
If you are fed up with early redemption charges and... Read More
same day cleaning service Morton Grove ..04/28/2005NASDAQ dropped -12.5% year to date in 2005. S&P500 index... Read More
As an investor you will want to check out any... Read More
How often have you come across an advertisement or e-mail... Read More
Professional stock options traders use the term lean to refer... Read More
Picking a beaten-down stock requires a different kind of selection... Read More
Much like the middle child, mid-cap stocks have long struggled... Read More
Picture one of those clubs where only the real heavyweights... Read More
Even if you don't own any of their stock or... Read More
A stock market index is a statistical measure of changes... Read More
As an investor you will want to check out any... Read More
Carefully thinking through your goal as a trader is of... Read More
As the man said, "I've got some good news and... Read More
Let's go into the details of why non-indexed mutual funds... Read More
Every broker and financial planner will tell you that you... Read More
There are many important things you need to know to... Read More
It is commonly reported that the stock market averages about... Read More
One of the basic laws of physics states that a... Read More
A common problem I often see when working with living... Read More
It is difficult to make money in a bull market,... Read More
From the book 'The Stockopoly Plan' by the author Charles... Read More
What does it take to be a stock trader? It... Read More
Every day on CNBC-TV they show a 200-day moving average... Read More
What account size do I need?How much money can I... Read More
Over the past few months, several investment professionals have brought... Read More
What can I expect to make my first year of... Read More
Stocks & Mutual Fund |