The Investor's Dilemma: How Mutual Funds Are Betraying Your Trust And What To Do About It

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Overview

Over 90 million individuals, in 55 million households, own mutual funds. But while one in every two households has entrusted their life savings to these funds, the industry has betrayed their trust. Intent on gathering ever more assets, fund families spew out new funds—600 in just two years—while existing funds flip stocks and even managers, with a calloused indifference to your welfare. It works, at least for the fund families. And thanks to an intensive marketing initiative, ...

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Overview

Over 90 million individuals, in 55 million households, own mutual funds. But while one in every two households has entrusted their life savings to these funds, the industry has betrayed their trust. Intent on gathering ever more assets, fund families spew out new funds—600 in just two years—while existing funds flip stocks and even managers, with a calloused indifference to your welfare. It works, at least for the fund families. And thanks to an intensive marketing initiative, some of them now have as much as $1 trillion under management.

That's why Louis Lowenstein has written The Investor's Dilemma: How Mutual Funds Are Betraying Your Trust and What to Do About It. Based on fresh, cutting-edge research by a leading corporate critic, this book reveals how highly overpaid fund sponsors really operate, using, for example, narrow benchmarks that will make even a mediocre fund look good. Step by step, Lowenstein walks you through the conflicts of interest, and even outright theft, giving the reader an inside look at some of the best-known fund groups.

Happily, Lowenstein also takes a direct, hands-on look at a representative group of tried-and-true value funds that have demonstrated a commitment to their investors' welfare. Instead of proliferating new funds every few months and diluting the results for those already there, this select group invests with patient research, holding their choices for years at a time and investing their dollars alongside yours. Along the way, Lowenstein discusses the important factors to look for when picking a stock fund. To illustrate the process, he analyzes two representative funds that are not too large and still open to new investors.

Even as this book shines a harsh light on much of what is wrong with the mutual fund industry, it also helps illuminate the brighter corners of today's investment environment. Written in an engaging and informative style, The Investor's Dilemma skillfully examines the real problems within the world of mutual funds and outlines a value-oriented approach to this market that will allow you to achieve investment success.

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Product Details

  • ISBN-13: 9780470117651
  • Publisher: Wiley
  • Publication date: 3/7/2008
  • Edition number: 1
  • Pages: 220
  • Product dimensions: 6.34 (w) x 9.23 (h) x 0.85 (d)

Table of Contents

Foreword     ix
Preface     xvii
Acknowledgments     xx
Introduction     1
Mutual Funds: A Painful Birth     7
In the Beginning     7
A Good Idea     11
Cracks in the Good Idea     13
Searching for Rational Investors in a Perfect Storm     17
A Perfect Storm     17
A Simple Survey     20
The Fortune 10 Test     22
The Performance Test     25
Value Investing: A Behavioral Finance Perspective     36
The Anatomy of the Stock Market     43
The Stock Market     44
Investing at Warp Speed     57
Sell It All Every Year?     58
Massachusetts Investors Growth Stock Fund     61
Investing Blind     66
Greed Is Good: The Appeal of a Publicly Owned Fund Management Company     69
T. Rowe Price     70
Profitability     71
How to Make 80 Percent a Year without Breaking the Law     72
Conflicts of Interest     75
Grow the Assets     78
Who's Watching the Store?     80
The Greed Factor     82
Candor Becomes a Casualty     85
Form over Substance: Shame on the SEC     86
The Failure of Candor Runs Deep     87
As Good as It Gets?     92
The Investor's Dilemma: Long on Life Expectancy, Short on Income, and Searching for Guidance     95
A Crisis of Moral Imagination     95
How the Other Half Lives...     102
Everyone Agrees: We Are Frightfully Poor Investors     104
And Now a Word from Pogo...     105
What Pogo Forgot     106
Of Bubbles and Swans     108
Are You a Patient Investor?     117
The Industrialization of Mutual Funds     119
Margin of Safety     120
Economy of Scale     121
How the Marketing of Mutual Funds Came to Look like Soap     121
Franklin Resources-A Study in Economies of Scale     125
Industrialization     127
Retailers, That's Where the Money Is     128
The Death of Security Analysis     129
Asset Allocation     132
Rebalance My Portfolio ... You Said What?     133
A Witch's Brew     137
About Those Benchmarks ...     138
Wrapping Up the Benchmarks     140
Managing by Rote Can Hurt ... Badly      142
Through a Window ... Darkly     145
The First Story behind Those Numbers     147
Multiclass Fund Shares     149
Now Here's a Stealthy Way to Influence a Broker's Advice     152
"Soft Dollars"?-Hey, That's My Hard Cash     155
Revenue Sharing     156
Corruption by Committee: The Story Gets Worse     159
Devious and Deceptive?     161
What's Missing from the Disclosures?     164
Some Particulars     164
Boards of Directors: Watchdogs or Lapdogs?     166
Some Unresolved Questions     169
How to Pick a Mutual Fund     173
An Overview     173
Back to Pogo ... and You!     174
Buy a Mutual Fund?     178
The Good Funds Fairly Shout Out Their Strengths     180
What to Look for in a Stock Fund     181
Price and Value     185
Index Funds     186
Two Stock Funds     189
Notes     193
Index     213
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  • Anonymous

    Posted May 14, 2008

    For everyone who wants to understand

    This is a clearly written, totally understandable book. A little scary, but knowledge is power, right!

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