Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Financial industry likes it hoping investors will just hold under any conditions and let them siphon off fees regardless of what happens to the markets.
Average investors like it for the same reason people liked to watch trash shows like Geraldo or whatever is the equivalent these days. Makes them feel good about themselves that they are not as bad as the "average" rather than suffer through the feeling that others are doing better than themselves.
"DALBAR pins the blame squarely on financial-services firms, which speak an arcane lingo that simply hasn’t registered with most Americans."
It's a racket folks. "Obfuscate" is the correct word. Make things so complex that average investors are unable to understand what you're actually doing and why your excessively high fees are justified. I'll toss most market neutral and LS funds into this category. (Am sure there are many others).
My simple advice: Read the latest annual fund report and look at the manager's allocation to various assets, his/her justification, what changes in that allocation have been made recently, and what the reason(s) were. If you can't figure out what the #*!* they're talking about, get the *#!# out. No - you're not dumb. They're just hoping you are.
I'm starting to think this is why many ratings by M* and others appear to make so little sense. The obfuscation by the fund's managers in their description and prospectuses have misled the rating companies into thinking the fund belongs in some "unique" category where it somehow rises to the top. It's not what it seems - but more likely a good job gaming the system and exacting higher fees from we unwary investors.
Put another way - If I was going to start a new fund, before designing it, I'd look to see which M* "categories" charge the highest average fees. Than, I'd shape the fund, prospectus, etc. to qualify for inclusion in that category. If presented as simply an "equity" fund, a .90 ER probably would make it non-competitive among some of its finer peers. But, if I could somehow "sell" the fund as "market neutral", that .90 ER would look darned nice against the competition. My new fund might even vault to the top of the stack.
And, if you haven't read Ed Studzinski's on-the-mark comments about fees in David's latest (April) commentary, be sure to do so!
Comments
It serves everyone's purpose though.
Financial industry likes it hoping investors will just hold under any conditions and let them siphon off fees regardless of what happens to the markets.
Average investors like it for the same reason people liked to watch trash shows like Geraldo or whatever is the equivalent these days. Makes them feel good about themselves that they are not as bad as the "average" rather than suffer through the feeling that others are doing better than themselves.
"DALBAR pins the blame squarely on financial-services firms, which speak an arcane lingo that simply hasn’t registered with most Americans."
It's a racket folks. "Obfuscate" is the correct word. Make things so complex that average investors are unable to understand what you're actually doing and why your excessively high fees are justified. I'll toss most market neutral and LS funds into this category. (Am sure there are many others).
My simple advice: Read the latest annual fund report and look at the manager's allocation to various assets, his/her justification, what changes in that allocation have been made recently, and what the reason(s) were. If you can't figure out what the #*!* they're talking about, get the *#!# out. No - you're not dumb. They're just hoping you are.
I'm starting to think this is why many ratings by M* and others appear to make so little sense. The obfuscation by the fund's managers in their description and prospectuses have misled the rating companies into thinking the fund belongs in some "unique" category where it somehow rises to the top. It's not what it seems - but more likely a good job gaming the system and exacting higher fees from we unwary investors.
Put another way - If I was going to start a new fund, before designing it, I'd look to see which M* "categories" charge the highest average fees. Than, I'd shape the fund, prospectus, etc. to qualify for inclusion in that category. If presented as simply an "equity" fund, a .90 ER probably would make it non-competitive among some of its finer peers. But, if I could somehow "sell" the fund as "market neutral", that .90 ER would look darned nice against the competition. My new fund might even vault to the top of the stack.
And, if you haven't read Ed Studzinski's on-the-mark comments about fees in David's latest (April) commentary, be sure to do so!