“I often think of six impossible things before breakfast’, according to the Red Queen. So it would seem in the mutual fund industry. They seem to be using ‘the different branches of arithmetic: reeling and writhing of course, and ambition, distraction, uglification and derision.’
Today’s WSJ runs an article (WSJ, 1/17/18, page C1) on the inclusion of Apple stock in both growth and value mutual funds. 77% of growth funds now invest in Apple, while 40% of value funds do the same. These fund managers think ‘we don’t know the meaning of half those long words’ Well, ‘we don’t believe they do either!’ They think that ‘four times five is twelve and four times six is thirteen and four times seven is…’ or so their deep analysis would lead us to believe. They insist that if we simply ‘read the directions in the right direction, directly we will be directed in the right direction’. Is this ‘nothing but a pack of cards?’
We are certain that ‘it would be nice if something made sense for a change’.
With apologies to Lewis Carroll for rewriting quotes from “Alice in Wonderland” to suit my point of view, I don’t think we are too distant, he and I, in describing our equally absurd fairy tales. At least his is entertaining. Mine is a sad commentary on the state of the nation’s investment politicians; err, Certified Financial Analysts, CFPs and the host of more than 200 ‘designations’ one can earn. These folks get paid more than you make in your investment portfolio to chase their own tale around a tree. Their egregious fees, typically greater than 1%, as well as their hidden expenses (see chapter seven, pages 90 -102 of The 7% Solution) are intended to offer you the potential for a greater return than if you had done the nasty job yourselves. In exchange for their ‘professional management’ you receive — lower returns at higher risk than if you had simply owned the S&P 500 ETF.
Apple is a case in point. I have no interest in the stock, nor do I follow it. Why should I , as it pays such a paltry dividend of 2.4%? Yet mutual fund managers of entirely different stripes each own it. Each praise it as a value or as a growth security. Which is it fellows? Do you think that ‘four times five is twelve and four times six is thirteen and four times seven is…’? Are you confused, wrong or simply foolish?
This nonsense has to stop. Another author has come out with a new book attacking my industry of 320,000 ‘financial advisors’, the investment community in general and the gurus who are always the side shows ready to fleece you of a few kopecks for trash (Orman, Bach, et al, take note). I offer her high praise for such courage. Read “Pound Foolish” by Helaine Olen. Then fire your advisor. Quick before he thinks of something impossible.