 |
|
The source of the best business, financial and legal news |
|
|
||||
|
||||
|
||||
|
|
|
|
|
 | |
| |
 |
Business Informations |
|
|
|
Mutual Fund Returns May Not Be As They Seem!
Arthur Levitt, during his tenure at the SEC, experienced many cases where the non-indexed mutual fund manager bought shares for their own accounts before the fund bought the shares. The fund's purchases drove up the price of the stocks and the fund manager's made a killing on the deal. This is called "front running," and is illegal under securities laws. Mr. Levitt also witnessed instances where the funds would buy huge blocks to run up the stock price at the end of the financial reporting period. This made the fund look like it had a high profit when it did not. This makes the fund's performance look better than it really is. The SEC brought enforcement cases against some of the largest and most respected companies during Mr. Levitt's tenure as SEC chairman. A mutual fund run by Van Kampen Investment Corp. for example, claimed in public advertisements that it had returned 62 percent in 1996. This information caused the fund-rating service Lipper Inc to report the mutual fund as the top performer in its class, a full 20% ahead of the second-best performing fund in the category. But investors weren't told that the excellent returns of the Van Kampen fund were on tiny assets of $200,000.00 to $380,000.00. This is because it was really a so-called incubator fund operating on seed money until its portfolio manager could establish a track record for marketing purposes. Nor were investors told that more than half the returns came from investments in thirty-one hot IPOs. An IPO is an "Initial Public Offering" that occurs when a firm first offers its stock across a public exchange. Since the stock is new nobody knows how it will perform except insiders. The fund only had to buy between 100 and 400 shares of each IPO to achieve a huge amplification of the returns. The 62% return unrealistically raised investor expectations and was unsustainable. When senior managers of Van Kampen decided to sell the fund to the public some 15,000 people invested $100,000,000.00 within six weeks. Van Kampen settled SEC charges that it had misled investors. What a bunch of con artists. The modern day mutual fund is like a remake of the movie "The Sting" where Paul Newman's character has been replaced by the fund manager! A fund run by Dreyfus Corp., owned by Mellon Financial Corp., paid almost $3 million to settle, without admitting or denying guilt, similar charges of fraudulently luring investors with unsustainable returns. Its manager claimed returns of more than 80%, but failed to tell investors that the fund had received a disproportionate number of IPO shares that should have been allocated to other Dreyfus funds. The fund industry should work less on image creation and more on making sure that it has done everything it can to safeguard investor's money and boost returns. The mutual fund industry has become a financial powerhouse over the past twenty years and only cares about how much money it can suck out of the public just as it was at the turn of the last century when they were called investment pools. Funds are glitzy marketing operations instead of stewards of other people's money. Don't put your trust in them unless they are fully indexed like the Vanguard 500 (VFINX). ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. "The Wallet Doctor", is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors by teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term "Irrational Exuberance." In 1998 he shouted to the world to "get out" of the stock market but now he is shouting to everyone that it is time to "get in!" The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing. Visit Dr. Brown's site at http://www.BonanzaBase.com or sign up for his investment tips at http://www.WalletDoctor.com
MORE RESOURCES:
investing - Google News |
|
|
|
RELATED ARTICLES
Trend Following Trend following also called momentum trading is the simplest and safest method of stock market investing. It puts you in stocks and mutual funds that are going up and gets you out when they start down. Investing Pointers for Neophyte Investors If you know next to nothing, how do you go about the business of investing? The first thing you need to know about investing is, how much do you really know? If its' not much, then you will need to read extensively to educate yourself.To become well-informed, you should read up on the basics. When It Comes To Investing, Asking The Right Questions Can Help You Make The Right Decisions Are you ready to open your pathway to financial independence?Well you should be. The sooner the better. The Demise of Buy & Hold Based on consistent results I think Buy & Hold should be renamed Buy, Hold & Bye-Bye. It sounded great for a while, especially for the huge majority of investors who don't have the time or interest in really doing due diligence on investments. Invisible Mutual Fund Fees Erode Your Returns! Many investors think that investing in mutual funds is free. What nonsense! Funds collect more than $50 billion a year in fees from investors. Will a Falling Dollar Derail Your Plans for Retirement? How much are you willing to pay for a tank of gas? We've all watched as gas prices hit record highs, but what would you do if you filled your tank and paid by credit card only to discover on your monthly statement that you paid $80 to fill an economy car. No, this is not some future doomsday projection of oil prices. Investing and Understanding What You Buy "There is nothing more frightful than ignorance in action!" Johann Wolfgang von Goethe (1749 - 1832)I don't really know how cars actually work. Not really! I know how to drive them, but if you asked me how they work, I would not really know how to definitely explain it. Variable Annuities You know all the articles you read about annuities that have extremely high fees? And the ones that people lose a lot of money in? Well, these are better known as variable annuities. yes, they do have some advantages. Planning for Retirement Almost without exception, people don't start planning for their retirement early enough in their lives. Young people leaving High School or College and going into their first paid position find it difficult to look or see ahead to age sixty or sixty-five. College Savings Plans - Are They The Best Choice For My Child? College Savings Plans - are they the best choice for my child?College Savings Plans, also called Section 529 plans, are one of the best ways to save for college because they offer:- Tax advantages- A variety of investment options- Flexible contribution options- Parental control- Little impact on eligibility for need-based financial aidTax advantagesInvestments in 529 plans are usually exempt from federal taxes. Earnings are tax-deferred and are not subject to capital gains taxes. Finding a Broker "Hey Joe! I need help finding a broker. I notice that discount commission rates are pretty much the same. Margin Benefits are Marginal at Best Margin is one of those things that novices find puzzling about the stock market, but the concept is really quite simple. Still, with understanding the basics of using margin accounts, determining the wisdom of using margin can be quite a conundrum. Useful Tips on Investing Here are some useful tips on investing. When you make an investment, you are giving your money to a company or an enterprise, hoping that it will be successful and pay you back with even more money. Lessons in Transition Q: What have been the most successful approaches to attracting direct foreign investments: offering prospective investors tax breaks and similar benefits, or improving the overall investment climate of the country?Empirical research has demonstrated that investors are not lured by tax breaks and monetary or fiscal investment incentives. They will take advantage of existing schemes (and ask for more, pitting one country against another). Preholiday Trading The Light Crude Continuous Contract closed at $66.13 a barrel Friday, after hitting an all-time high at $67. Going Against the Conventional Investment Wisdom First of all, I want to give everyone the disclaimer that I am not a registered financial advisor and I don't play one on TV. Therefore, I cannot legally provide financial advice and I will not do so. Introduction To FOREX The Foreign Exchange Market, better known as FOREX, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. 5 Ways To Protect Your Bond Portfolio From Rising Interest Rates The Federal Reserve recently raised its target federal funds rate for the first time since March 2000. This could be just the tip of the iceberg, though, as many experts believe rising inflation and a strengthening economy will spur continued rate hikes for the foreseeable future. Credit Scores = ROI Profits for Real Estate Investors Strong credit saves real estate investors money on mortgage finance costs. A good credit score, along with the other credit and mortgage qualifications, means that investors can pay lower fees for financing, such as points and interest charges. Finding the Perfect Company The perfect company - it's the holy grail of the investment world. The company that will make its initial investment hundreds of times over.
|
| home | site map |
| © 2006 |
|
|
|
|
|
|
||||
|
||||
|
Comment by Frank O'Donnell
