| tion_start --> | | | | detrimental to client profits - These fees pay for |
| In the 1940's Fred Schwed and posed a simple | | | | the brokers yachts. |
| question in his famous book - Where are the | | | | Choosing a manager to perform |
| customer's yachts? | | | | That's not to say you can't find good managers |
| He noticed that all the stock brokers, investment | | | | there are some around but you need to hunt |
| advisors, and fund managers had yachts, but | | | | them out and there are many who do make |
| what about the customers? Where were their | | | | money by taking a different approach: |
| yachts? | | | | Rather than paying dealing fees they have |
| If you have ever wondered why your broker or | | | | confidence to be paid on performance, they deal |
| mutual fund manager never makes you money | | | | in derivative products and they give |
| this article is for you! | | | | representative track records of ALL Funds under |
| As applicable today as it ever was! | | | | management. |
| Both humorous and entertaining, this book | | | | The traditional way doesn't work as this quote |
| exposes the folly and hypocrisy of Wall Street. | | | | neatly sums up the problem: |
| The book gives brutally honest view of a world, in | | | | "It's amazing how well Schwed's book is holding up |
| which brokers get rich while customers go broke | | | | after fifty-five years. About the only thing that's |
| and it's still true to day! | | | | changed on Wall Street is that computers have |
| 90% of fund managers under perform | | | | replaced pencils and graph paper. Otherwise, the |
| So why do the bulk of investment managers | | | | basics are the same. The investor's need to |
| make money for themselves when the reality is | | | | believe somebody is matched by the financial |
| 90% of mutual funds cannot even out perform | | | | advisor's need to make a nice living. If one of |
| the stock index? | | | | them has to be disappointed, it's bound to be the |
| The answer is simple and just as true today as in | | | | former." |
| the 40s when the book was published: | | | | John Rothschild, Author, A Fool and His Money, |
| 1.Investment managers are great salesmen and | | | | Financial Columnist, Time magazine |
| convince you with clever marketing material about | | | | There are many hungry managers around who |
| their expertise and how they can do better than | | | | see an opportunity to charge performance fees |
| you and most investors simply think they know | | | | and put their interest as the same as the clients - |
| best. | | | | Making money. |
| 2.The bulk of investment managers simply | | | | They may not do so, but at least they are |
| present the best fund they have they forget to | | | | showing confidence and taking an approach that |
| tell you about all the ones that don't make money. | | | | can lead to big gains for clients rather than |
| They simply pick the best and eventually that one | | | | mediocre performance. |
| dives and they move to the next one. | | | | Targeting 30 - 50% annualized gains |
| 3.They don't make money from making you | | | | Many of these managers are producing 30 - 50% |
| money in most cases. They earn money from | | | | annualized gains. Simply follow the above advice |
| fees and their sometimes very large. Dealing fees | | | | on seeking them out and read - Where are the |
| and making money are a conflict of interest! | | | | customer's yachts? |
| Most of the time the desire to make fees is | | | | |