Here's My Two Cents On Investing
I believe there is now a professional, well-trained elite, supported by large institutions, that is adept and willing to use corrupt practices to accumulate wealth. Despite assurances from game-theorists and anthropologists that the criminal cadre in the species remains a constant percentage over time.
It is partly, of course, simple Wall Street and boardroom greed, a cousin to the greed and gargantuan rewards in entertainment and sports. It is partly the degradation of professional standards, of the concept of the fiduciary, akin to the same market-driven devolution in divergent fields such as medical care, Hollywood, publishing and, yes, journalism.
My guess is that financial historians will start the clock in this epoch with the big merger scandals of the 1980's -- Ivan Boesky, Michael Milken and scads of lesser cads. Next came the long running, now forgotten, S&L scandals. Then a lull (maybe), punctuated by the pretty picture of the tech boom. That delusional portrait was been redrawn when we learned of the rigged IPO's, insider trading, completely corrupt "analysis" practices at the Wall Street giants and old-fashioned flimflam.
So, pension funds were raided, an entirely legal scandal. And now we're learning about the mutual fund grifting rampage that may affect Main Street as much as prior fiascos: Putnam, Alger Management, Bank of America, Morgan Stanley, Strong Capital Management, PBHG Funds, Bank One Corp., Alliance Capital, Janus Capital Group are some of the implicated names.
The slow down down of buying mutual funds is exaggerated. Funds have grown and adapted over their 80-year history and continue to meet investors' needs for diversification and professional management. Better tools to analyze and select funds mean CPA/financial planners can make better use of them in client portfolios.
CPA/Financial Planners have a variety of analytical tools they can use to make mutual fund recommendations. These include software, Internet databases and other online research tools that make it easier to compare and contrast funds, determine risk and provide in-depth information on a prospective purchase.
As originally conceived, mutual funds had serious flaws, some of which are described here. The industry responded. Total shareholder costs on equity mutual funds declined 40% over the last two decades, funds now come in every size and flavor and management has worked diligently to reduce the annual bite for taxable investors by lowering portfolio turnover.
Exchange-traded funds answer some tax and fee problems as well. With ETFs, investors don't realize gains until they sell their shares. Fees for the indexed versions are now averaging under 20 basis points compared with 100 basis points on traditional open-ended funds.
For example, Fidelity gives investors access to 41 discrete industries. Some mutual fund companies also are responding to the exploding demand for the absolute return strategies of hedge funds and private equity funds that invest in pre-IPO equity and other nonpublic securities.
Generally, having five to eight funds in your fund portfolio should meet your investing needs. The key to your strategy is figuring out your timeframe, risk level and asset allocation first before looking at fund categories and finally plugging in the actual funds.
Article Source: FxTradingStock.com
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by: Arthur McCain
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Date: Tue, 31 Aug 2010
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