A Good Fund Manager

Every Wall Street analyst, financial planner and broker will tell you that the right way to pick a mutual fund is find a good money manager of a fund that has a long time record.

Yes, I believe that too, but it is amazing that when you go back in time to see what this genius did with the mutual fund, you will find years he has had some terrible losses. Would you want to own that fund then? In the year 2000 about 60% of all mutual funds declined. Many had losses of 30%, 40% and many over 50%. That is when they tell you things like: "you have to be in for the long haul", "this is only a market correction" and "the market always comes back". Among others.

One of the best-known mutual funds, Fidelity Magellan, dropped from a high last year of 146 to 100. That is a 32% loss. Yet this fund manager received a salary of over a million dollars. Did you know the average fund manager made $290,000 last year? How can that kind of money be paid to a person who loses your hard-earned cash? The great majority of fund managers today have not experienced a long-term bear market. They are too young. A few of them did go through the 1987 crunch in which the bottom was reached in 3 weeks. They did not have a chance to sell off their weakest stocks. Of course, they had plenty of time before that fateful 508-point one-day loss to unload some of their dogs. Unfortunately, fund managers are not taught to sell and they definitely do not understand that sometimes cash is the best position.

A major fallacy of mutual fund charters is that they must always be fully invested. There are many funds that have specialties such a Pacific Rim, Russia, real estate, indexes of various kinds, socially responsible, big cap, small cap and on and on. There are times when almost everything in that sector is going down and there is nothing to buy, but the fund charter maintains they must be fully invested. In defense of the fund manager he must buy even if it is garbage. He is not allowed to preserve the investors capital by staying in treasury bills.

If you think a fund manager who loses 30%, 40% or more of your money at any time is a good fund manager then you have been snookered by Wall Street. There is only one way to protect yourself from that type of money mismanagement and it is very simple. If the fund you own drops more than 15% from its highest price any time after you own it then you must sell it immediately even if there is a sales charge or redemption fee. The first rule of investing is "protect your capital". You even have to protect yourself from "a good fund manager".

Al Thomas' 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 at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

In The News:


Alfred E. Newman

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

Trapeze Artist - Swinging with the Stock Market

When we go to the circus we see a trapeze... Read More

Planning Your Dive and Diving Your Plan ? Trading!

A colleague of mine just returned from a scuba diving... Read More

Value Investing: Selecting From The Bargain Bin

Picking a beaten-down stock requires a different kind of selection... Read More

The Top 10 Reasons to Invest in Mutual Funds

Everyone who follows the financial news has heard of mutual... Read More

Invest In The Stock Market For The RIGHT Reason, Using The RIGHT Choices

Invest in the stock market for the RIGHT reason, using... Read More

Advisory News Letters

Several times each month I am solicited by various market... Read More

Your Job

There are so many kinds of work that needs to... Read More

Dividend Reinvestment Plans: Investing on Automatic Pilot

If you're like many investors who squander those small dividend... Read More

Good Stock Market Tip; Good Return!

Forget making a profit; instead focus on the income provided... Read More

Stock Market Education; Day Trading for Beginnners; How to Pick Stocks

The trading method you employ to approach the stock market... Read More

Fake Money

Reach in your pocket and take out that big roll... Read More

Hedge Fund Advertising

Have you seen all those big full page ads for... Read More

What Our Investment Advisor Wont Say Off The Bat

Most advisors will tell you they can beat the market.... Read More

Buy and Hold Investment Philosophy

Wall Street has been preaching the doctrine of Buy and... Read More

Oil Stocks As A Long Term Investment

The demand for world oil is increasing while world reserves... Read More

Mr. Market

I constantly hear the talking heads on CNBC-TV, the radio... Read More

The 401(K): How The Insider Has Stolen Your Retirement!

Mutual funds were moderately successful in creating a presence in... Read More

How Much Information Do You Need?

You have decided to buy some stock or mutual funds,... Read More

Market Success

Who are the successful investors?There are those who follow the... Read More

Series 7 Exam

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

The Secret Art of Backtesting

If you have not back tested your trading system, you... Read More

Duct Tape

Did you run out to buy that duct tape yet?... Read More

So, What is This Stock Market Thing Anyway?

We've all heard of the stock market and probably have... Read More

3 Components Needed for Beating the Market

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