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Article Title:
The Inside Scoop on Mutual Fund Rip Offs

Article Description:
The bear market that showed up at the end of 2000 has every 
brokerage house—as well as the entire mutual fund 
industry—scrambling to find creative ways to boost both their 
image and bottom line. Unfortunately, this is often at the 
investors' expense.

Additional Article Information:
741 Words; formatted to 65 Characters per Line
Distribution Date and Time: Tue Apr 18 04:34:46 EDT 2006

Written By:     Ulli G. Niemann
Copyright:      2006
Contact Email:  mailto:[EMAIL PROTECTED]

Article URL: 

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The Inside Scoop on Mutual Fund Rip Offs
Copyright © 2006 Ulli G. Niemann
Successful Investment

The bear market that showed up at the end of 2000 has every 
brokerage house—as well as the entire mutual fund 
industry—scrambling to find creative ways to boost both their 
image and bottom line. Unfortunately, this is often at the 
investors' expense.

Fund managers are ever on the lookout for ways to spin the stats 
to hide lousy track records and to find ways to obscure fees. 
To add insult to (financial) injury, investors end up being 
penalized for selling. So what's an investor to do? In this 
case, knowledge is power. Here are some of the ways mutual fund 
investors are being taken advantage of:

    * Performance is always an issue for any investor. Formerly 
      great funds, which I've used myself during the 90s, are 
      the junkyard dogs of this century. Janus Fund comes to 
      mind and is one of many that buy-and-hold investors got 
      stuck with. It's down 59%, since we acted on our Sell 
      signal on 10/13/2000.

    * Most of the funds today have 12b-1 fees place, and some 
      go as high as 1% of a fund's assets per year. Between 
      fees, commissions and management charges, the mutual 
      fund industry is always getting paid, even if you, the 
      investor, are losing money. For example, if you had 
      bought SunAmerica 2-1/2 years ago, you would have paid 
      the above fees at 2.35% per year. And, if you finally 
      decided your investment wasn't going anywhere, you 
      would have been stuck with a 5% deferred sales charge.

    * If you hold a fund less than 180 days, plan on being 
      hit with a redemption fee. It's almost standard. What's 
      the deal? Brokers only get paid while you hold their 
      fund. So, if you're going to sell, they get a last 
      whack. It's a great deterrent for selling, too. Can 
      this be avoided? Not completely, but if you have your 
      money managed by an investment advisor, the holding 
      period is reduced to 90 days.

    * Then there's the deceptive no-load rip-off involving 
      B-shares. Sure investors don't pay anything up front 
      for these, but you'll pay hefty surrender fees when 
      you sell. Plus, they carry higher management fees.

Keep in mind that mutual fund companies have market share in 
mind, not your best interest. If you think that might not be 
true, consider the skyrocket growth rate for pure technology 
funds. But look at them now: they've crashed & burned and no 
buy & holder has come out with a win.

Then there's the sad story of incompetence in the mutual fund 
industry. There are hordes of inexperienced financial planners 
(commissioned salesmen) just waiting to sell you load funds (A 
and B shares), or to recommend an asset allocation approach with 
no real plan or strategy that will serve you in a bear market.

Of course, there's always the option of having a perfectly 
balanced portfolio designed. Such was the case when a prospective 
client phoned me in 1999 during the height of the technology 
boom. He felt left out because everybody was making money in one 
of history's great bull markets, but his portfolio was so well 
balanced that he was neither making nor losing anything. He would 
have been better off in a money market account.

To me, the term balanced portfolio translates into this: I have 
no clue what I'm doing, where the major trend is, what I should 
be buying or whether I should be in the market in the first 
place. I'm hedging so much that one investment goes up and 
another goes down.

Balance is one thing and safety is really quite another. And 
mutual funds do not automatically mean either safety or balance. 
The key is always information—knowing how to get reliable info 
and what it means once you have it.

This is not for everyone. If you have money to invest and you 
don't have the time or the inclination to do the homework, then 
your smartest move is to find someone you trust. That would be 
someone with a track record you can verify, and someone who is 
not going to make money off your investment every time you buy 
or sell something.

People like this do exist, and the good news is you only need to 
do your homework once. That's when you check them out. From then 
on, you can relax knowing you're just not likely to fall prey to 
any of the rip-offs that are out there.

© Ulli G. Niemann

Ulli Niemann is an investment advisor and has been writing 
about objective, methodical approaches to investing for over 
10 years. He eluded the bear market of 2000 and has helped 
countless people make better investment decisions. To find out 
more about his approach and his FREE Newsletter, please visit:



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