Thursday, August 28, 2008

Investment Pet Peeve

Simply put: commissioned financial “advisors” are allowed within ten feet of an investor with limited resources and limited knowledge, the illusion of dealing with a recognized name giving a false sense of security. This system of investment deceit is sanctioned by the SEC itself. Consequently, they get involved in front loaded mutual funds that are frequently unsuitable for their financial circumstances.

The best remedy is education, but some do not have the time or inclination. Those with limited financial resources who are dependent on the income from their nest egg, or are risk adverse, are probably better off simply constructing a laddered CD program and let the program nearly self manage itself Or, let that be a component of an investment program and seek out one of the discount brokerage houses such as Schwab or Fidelity where no load funds can be bought to compliment the laddered CD portion (and where the CDs can be bought as well). Both firms have salaried (not commission compensated) representatives at their offices who can help.

For those who have a greater interest in investments, here are a few web sites I regularly read: First the guru of bonds, the very erudite Bill Gross who manages the largest bond investment portfolios in the world. You can read his regular monthly Investment Outlook column at Then there are the Weekly Market Comment columns of John Hussman, an economist who runs a couple of mutual funds: Nouriel Roubini's Global EconoMonitor is a very sobering view of the economy: As a recent New York Times magazine article made clear, Roubini’s observations have proven to be so prescient, one may be hard pressed to call him a pessimist Finally, there is hedge fund manager Jeff Matthews’ Is Not Making This Up blog who expresses his unique and sometimes irreverent perspective on investment topics.

Mutual funds are not completely transparent as the SEC restricts what managers can say, how often, and when. You can learn of changes in portfolio or investment strategy in retrospect via quarterly filings, but this information can be as much as three months after the fact. In this regard, I’ve been admiring “Trader Mark” whose objective is to raise $7 million to start a legitimate mutual fund that he has been managing as a “virtual fund” since last year, providing a running commentary on the logic behind his trades and his views on the economy and the market. Thus far his trading strategy has been effective in these very uncertain economic times. Once his Rising Tide Growth Fund is launched, regulatory restrictions will silence some of his commentary, but meanwhile, it is a good education to follow his exploits. (And I admire managers who invest their own money in their own funds – it really should be a requirement.) Here is where you can follow Mark: