Dear FutureMoneyTrends.com Member,
What if I approached you with a business proposition? We’re going to buy publicly traded companies. We will use your money – a lump sum at the beginning and then more of your money every month. You will take on all the risk and I will take on none. Now, for helping you buy these businesses, I’ll charge you a fee – one that compounds and continues to make me wealthier no matter what. If my stock picks go up, down or sideways, I get paid. To really sweeten the deal, I will also charge you hidden fees that you don’t really see: trading fees, brokerage fees, and about 20 others.
What Do You Say… Ready to Do Business?
Sadly, 92 million Americans have said yes to this exact business model. Every day people think that hiring an expert to manage their investments will somehow give them an edge – a layer of safety so they don’t hurt themselves financially.
The truth is the mutual fund industry is one of the most aggressive scams I have ever witnessed. Even with overwhelming data showing that over 99.6% of mutual funds don’t even beat their index, millions of people continue to pour money into them. In all, the industry manages $13 trillion.
First off, your broker is not an expert on investing; let’s just start right there. With the exception of a handful, nearly all brokers make a living not from investing, but from charging fees to their clients and making sales, i.e., acquiring new clients.
For the most part, Americans don’t even seek out the successful managers who made their millions or billions from investing. Instead, they opt for the salesman, oftentimes assigned to them by their 401k plan.
7 Reasons Why the Mutual Fund Industry is a Huge Scam
- Many of the fees are hidden. There is the sticker fee (1-3%), and then what you don’t see, like the manager’s salary being deducted from the fund’s returns.Consider this: $10,000 invested over 10 years will have approximately $1,883 in fees, according to Yahoo Finance. Compare that to the Vanguard 500 Fund, which would be just $154. And to top it off, you have a 99.6% chance of beating a managed fund.
- Financial advisors don’t add value, at least most of them. This has nothing to do with what kind of people they are, this is just the fact. Index funds that aren’t managed do better when compared to managed funds. It’s just a fact.
- Your broker and other financial planners are paid to recommend certain funds. Everything from lunches to Yankee tickets, these people are well compensated to send the 401k flow of money a certain way – even if it’s not the best choice for their client.
- Morning Star and others who rate mutual funds encourage performance chasing. Think about it, funds that are reaching all-time highs. Is that really the one you want to invest in? A study actually published by Morning Star found that a 1-star fund and 4-star fund had no predictability on how they would perform the following year.
- Your mutual fund is spending millions in political campaign contributions. Not to protect you, but to keep anyone from knowing what they are up to.
- According to Motley Fool, only 10 mutual funds in 10,000 beat the S&P 500 consistently over the past 10 years.
- The industry misleads ignorant investors with sexy names for their funds.
Gee, let me see… do I want to the “Aggressive Growth Fund” or the “Value Growth Fund?” I mean seriously, who doesn’t want the “growth fund.” Sounds like a no-brainer, right?
Avoid This Business Industry Like the Plague
The truth is if every American sold their mutual funds today and just bought low-cost index funds, the entire country would be wealthier this time next year. Not just from dramatically lower fees, but because the index funds consistently beat managed funds.
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