Mutual Fund Expense Lies

When purchasing mutual funds we are cautioned to read the prospectus, look at past performance, check out the fund manager's record and see what their expense ratios have been.

We are also told that we should not buy funds with expenses exceeding 1% to 1.5%. When you ask the fund salesman (don't forget he's a salesman) he will assure you that the fund expenses are whatever is shown in the prospectus. He is telling you the truth, but not the whole truth, according the Securities and Exchange regulations. In many cases he has left out a big chuck of expenses.

The 1.5% expense means you are paying $150 each year of every $10,000 you have invested with that fund. The lower the expense is the more of your money is at work. As a fund becomes larger meaning they take in more money the expense ratio should drop, but it rarely does.he fund manager must make 1.5% to have your money stay even.

If you can find your way around the Securities and Exchange Commission internet web site you will find that the definition of expense ratio leaves out commission charges. Many funds will turn over their portfolio by 100% in a year. Obviously they are not going to buy and sell at no charge. The floor broker must be paid a commission for each share that is executed.

Sometimes brokerage fees are purposely inflated and the broker kicks back favors(they don't call it that) such as research information, free computers and other favors. Been to the Hampton's or Hawaii for that all-expense weekend seminar? Course not.

The SEC does not require that this commission cost be disclosed as an expense. Why? Their answer is pure government hokum, "We exclude brokerage costs because we have always excluded brokerage costs". This is the SEC that is supposed to be the watchdog for the investor.

Leaving out this important fact will hide another .25 to .50 cents or more in some cases in expenses that you are paying for. When you call the fund to ask if their brokerage commissions are included the person to whom you are speaking probably won't understand and will give you the standard answer that the number shown in the Prospectus is correct. Getting a true answer is like pulling an impacted wisdom tooth. If you can get one.

Brokerage commissions are known to the penny and could easily be included in the prospectus, but these "soft dollars" as they are known are not made public to the investors seem to disappear.

Fund managers say these costs are insignificant and that investors should look at the fund's performance. If they did that and really understood what they were looking at they probably wouldn't buy 90% of the domestic stock funds.

This is just another example of how the investor has the wool pulled over his eyes and another reason I find prospectuses worthless.

Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter and receive his market letter for 3 months at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2005

---

Stock Options Trading Strategies - Lean

Professional stock options traders use the term lean to refer... Read More

How To Be A Winner

Everyone who invests in the stock market wants to be... Read More

A Good Fund Manager

Every Wall Street analyst, financial planner and broker will tell... Read More

3 Components Needed for Beating the Market

Time to look back2004 is over, now we are in... Read More

How to Evaluate Load vs. No Load Mutual Funds

If you have been dealing with mutual funds for any... Read More

Investing in Dividend Paying Stocks

I was recently interviewed for a press release through a... Read More

Buying New Issues

Has your broker been calling you recently with the "great... Read More

Analyzing Growth Stocks: An Important Focus For Any Investor

Analyzing growth stocks is an important focus for any investor.... Read More

Hot Stock Investing ... How to Pick Hot Stocks with Momentum Stock Trading

Profitable day traders recognize that momentum trading is among the... Read More

Inertia

One of the basic laws of physics is that a... Read More

Stock Market System ... ONLINE STOCK TRADING ... Beyond Day Trading Basics & Tips

Day trading is all about making buy and sell decisions.... Read More

What To Buy?

Now that you have some money burning a hole in... Read More

Stock Market Course .... Day Trader Online Seminar ... Can You Generate Profits Trading from Home?

When it comes to stock market trading it PAYS to... Read More

Long Term Financial Vehicles

Investing in long-term financial vehicles give you the most gains... Read More

Parachute Investing

Ever jumped out of an airplane? It's OK if you... Read More

Dividend Paying Stocks

I would like to share with the reader an article... Read More

Alfred E. Newman

What! Me worry?Many of you remember the cover of MAD... Read More

Complacency Indicator

If you haven't heard of the technical indicator with the... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

The Secret Method to Selecting a Winning Trading System

Every successful trader has a winning system. There are of... Read More

Option Spread Trading

Spread trading is a technique that can be used to... Read More

Nest Eggs and Omelets

Do you have a nest egg? You know, a place... Read More

Overseas Investing: Going Against the Mainstream

TOO OFTEN, INVESTORS SIMPLY CHOOSE TO follow the crowd. This... Read More

Selling Strategies - Setting a Stop Loss

Sometimes the best way of lowering exposure to risk is... Read More

Stock Loans

Hedge current portfolio positions and gain access to capital resources... Read More

Series 7 Exam

What is the Series 7 Exam? If you... Read More

The Elephant

Four blind men were asked to give a description of... Read More

Frog In The Pot

You remember the story about the frog that was put... Read More

The 1% Solution

You probably know the story of Sherlock Holmes and the... Read More

Investing Basics - Stocks, Mutual Funds, Real Estate & Online Investing

Have you ever thought of investing? Do you have a... Read More

Why Stock Is More Risky Than Options!

You probably have been told that options are risky. Even... Read More

How to Read an Annual Report

Every publicly traded company is required by the SEC(Securities and... Read More

Good News?

As the man said, "I've got some good news and... Read More