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.
More fences, more gates. I would imagine, in the not-too-distant future, there will be additional rule-making "to help us manage our investments more prudentially," to protect us from ourselves, and to better ensure "market efficiency." Following a perfunctory 30-d public comment period, of course.
Doesn't fire-proofing funds reduce the potential return? Can I still invest in a very risky fund if I want to - knowing that increased risk often leads to increased return over longer periods? Do you really want your emerging markets bond fund or small cap equity fund to be as safe and secure as bank deposits (now yielding less than 1%)? Something in me doesn't like all these new rules.
However, if investors refuse to read the prospectus and excercise common sense in their fund purchases - perhaps this is the only alternative. I'd like instead some type of uniform "risk" label applied to all funds sold to the public. 4 or 5 different risk levels should be adequate. This would also give fund companies an incentive to structure their funds so as to qualify for a lower risk rating. Novice investors, those near retirement, etc. would know in advance which funds represented the higher risk of principal loss over the near term and would be cautioned to avoid these.
Many companies do exactly that. T Rowe Price does an excellent job displaying risk using bar graphs and than elaborates on that risk in their fund commentary. Even here, however, I suspect many ignore those classifications and invest more aggressively than prudent for their circumstances.
Funds would also be prohibited from acquiring any asset that couldn’t be sold within seven calendar days if it would mean that such assets would account for more than 15% of their net assets.
Funds would be required to invest a minimum percentage of their net assets in positions that could be converted to cash in three business days.
Hey........good luck with the above in bold.
Have the investment companies abide with some simple rules as noted in the article. The SEC will legally note to them that a violation or failure of the organization to be "liquid" will result in the "nationalization" of the firm, all employees are terminated and all account assets will be automatically converted to 10 year Treasury issues with notification to all account holders; who may them rotate their funds into another investment company on the "chosen one's" list. Management, please sign on the line following the X _______________________
None of the above is not unlike the special actions taken during the 2008 melt. Many FDIC institutions have since been terminated and the accounts move to bank "X".
The "gov" can guarantee the whole thing. Tis in the best interest of the country in general.
Funds | Mon Oct 5, 2015 10:13am EDT By Lawrence Hurley
Oct 5 (Reuters) - The U.S. Supreme Court on Monday left intact an appeals court decision that allowed a financial adviser to sue Charles Schwab Corp over allegations that the brokerage firm deviated from objectives set for a mutual fund, costing investors millions of dollars in losses.
The court rejected Schwab's appeal of a March ruling by the 9th U.S. Circuit Court of Appeals that revived the lawsuit. The..court said Northstar Financial Advisors Inc could sue on behalf of its clients and that Charles Schwab should face claims of breach of contract over the alleged losses in the Schwab Total Bond Index fund.....plaintiffs said that by investing more than 25 percent of assets in non-agency mortgage securities and collateralized mortgage obligations, Schwab portfolio managers ignored the fund's fundamental investment objectives of tracking the Lehman Brothers U.S. Aggregate Bond Index and avoiding big industry bets.
Just maybe the investors should be sue happy & sue their adviser also for not removing them from the fund ?! Derf P.S. Will this open up a can of worms so to speak?
Comments
However, if investors refuse to read the prospectus and excercise common sense in their fund purchases - perhaps this is the only alternative. I'd like instead some type of uniform "risk" label applied to all funds sold to the public. 4 or 5 different risk levels should be adequate. This would also give fund companies an incentive to structure their funds so as to qualify for a lower risk rating. Novice investors, those near retirement, etc. would know in advance which funds represented the higher risk of principal loss over the near term and would be cautioned to avoid these.
Many companies do exactly that. T Rowe Price does an excellent job displaying risk using bar graphs and than elaborates on that risk in their fund commentary. Even here, however, I suspect many ignore those classifications and invest more aggressively than prudent for their circumstances.
AAA
Funds would also be prohibited from acquiring any asset that couldn’t be sold within seven calendar days if it would mean that such assets would account for more than 15% of their net assets.
Funds would be required to invest a minimum percentage of their net assets in positions that could be converted to cash in three business days.
Hey........good luck with the above in bold.
Have the investment companies abide with some simple rules as noted in the article. The SEC will legally note to them that a violation or failure of the organization to be "liquid" will result in the "nationalization" of the firm, all employees are terminated and all account assets will be automatically converted to 10 year Treasury issues with notification to all account holders; who may them rotate their funds into another investment company on the "chosen one's" list.
Management, please sign on the line following the X _______________________
None of the above is not unlike the special actions taken during the 2008 melt. Many FDIC institutions have since been terminated and the accounts move to bank "X".
The "gov" can guarantee the whole thing. Tis in the best interest of the country in general.
By Lawrence Hurley
Oct 5 (Reuters) - The U.S. Supreme Court on Monday left intact an appeals court decision that allowed a financial adviser to sue Charles Schwab Corp over allegations that the brokerage firm deviated from objectives set for a mutual fund, costing investors millions of dollars in losses.
The court rejected Schwab's appeal of a March ruling by the 9th U.S. Circuit Court of Appeals that revived the lawsuit.
The..court said Northstar Financial Advisors Inc could sue on behalf of its clients and that Charles Schwab should face claims of breach of contract over the alleged losses in the Schwab Total Bond Index fund.....plaintiffs said that by investing more than 25 percent of assets in non-agency mortgage securities and collateralized mortgage obligations, Schwab portfolio managers ignored the fund's fundamental investment objectives of tracking the Lehman Brothers U.S. Aggregate Bond Index and avoiding big industry bets.
They said this caused the fund to lag its benchmark from Sept. 1, 2007, to Feb. 27, 2009, losing 4.80 percent while the index posted a positive total return of 7.85 percent.
http://www.reuters.com/article/2015/10/05/usa-court-schwab-idUSL1N12512920151005
Derf
P.S. Will this open up a can of worms so to speak?