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:

It's Time to Tax Financial Transactions  The Washington Spectator

Mr. Market

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

Cash

How many people went to a cash position this week?... Read More

Laws and Efficiencies and Theories of Diminishing Returns

The basis of diminishing return discussions surround such simple notions;... Read More

Forces that Move Stock Prices

Among the largest forces that affect stock prices are inflation,... Read More

Successful Trading ? Establish Your Risk Level

Before you embark upon a journey of trading stocks or... Read More

The Three Little Pigs Went to the Stock Market

Three little pigs went to the market to stock up... Read More

Where Is The Beef?

Where is the beef? Or maybe it should be where... Read More

Discover the Retirement Breakthrough the Federal Government Created for You - The Roth IRA!

If you don't know what a Roth IRA is then... Read More

3 Components Needed for Beating the Market

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

Gold Fever

Right now there doesn't seem to be any "gold fever".... Read More

The Great Stock Market Secret

When the stock market is going up and all your... Read More

Shadow Bull

As one of my regular readers you know I have... Read More

Planning Your Dive and Diving Your Plan ? Trading!

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

Mindset

In 1960 an engineer working for a watch company in... Read More

The Secret Method to Selecting a Winning Trading System

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

Stock Trading - Daddy, Why Arent We Rich?

One Saturday morning, while he was sitting at his computer... Read More

Expense Ratios

Mutual funds and brokers are always preaching not to buy... 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

Seecrets on Investment: Tired of Making Huge Losses in the Stock Market ? Part 2

Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More

Can?t Stand The Heat

It seems that every day I turn on the TV... Read More

Trapeze Artist - Swinging with the Stock Market

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

What the SEC Really Thinks About Mutual Funds!

Let's go into the details of why non-indexed mutual funds... Read More

Zero Sum Game

Most people think the stock market is a zero sum... Read More

Choosing An Investment Stock Broker

If you want one.And I don't recommend any broker with... Read More

Lemmings Are Gathering

Before they go over the cliff to their destruction these... Read More