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401(k) Plans
You have permission to this article either electronically or in print as long as the author bylines are included, with a live link, and the article is not changed in any way (typos excluded). Please provide a courtesy e-mail to ...
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Different Types of Mutual Funds
This is a guide to the different types of mutual funds. When it comes to investing in mutual funds, investors have literally thousands of choices. Before you invest in any given fund, decide whether the investment strategy and risks of the fund...
The Nasty Truth About Mutual Funds Investing
Here are some facts that might make many fund investors question why they have chosen to invest in funds at all. According to John Bogle, former CEO of Vanguard Funds, one of the most trusted authorities on investing in mutual funds and a strong...
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Financial Planning for Singles
Financial planning often gets a bad rap. Part of the problem is self-inflicted, since some industry participants would rather sell you a product than address your financial concerns. The process of planning is important, though, whether done with a...
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DON’T LET MUTUAL FUND NAMES FOOL YOU OUT OF YOUR RETIREMENT!
Mutual fund managers use fake fund names to part you from your money such that you cannot judge what a fund does by its name. Many funds have names that are outright misleading or even deceptive. In the late 1990’s, for instance, during the technology stock bubble, some portfolio managers took advantage of public’s desire to chase the latest fad by slapping “internet” in front of their fund names.
The chances of that happening now are possibly lower. As of July 2002, the SEC requires funds to have at least 80% of their assets in securities that their fund name implies, up from 65% previously. This new rule is forcing funds that called themselves something like the America’s Government Fund to either dispose of East Asian government debt if it exceeded 20% of fund assets, or to change the fund’s name.
Likewise for funds that call themselves an equity income fund but have 25% of assets in stocks that paid no dividends. More than five hundred funds have had to change their names because they failed the 80% rule. Invesco’s Blue
Chip Growth fund, for example, is now called just growth fund, since 60% of its holdings are in technology stocks, and many of those can hardly be called blue chips these days.
The 80% rule still allows mutual funds to invest in just about anything up to 20% of holdings. Why don’t you just avoid the entire problem by buying shares of an indexed mutual fund when you only have a selection of mutual funds to select? For this reason I strongly recommend that if you can only buy mutual funds, as in the case of the 401(k), then restrict your purchases to indexed funds such as the Vanguard 500 (VFINX). The best you can do is to learn to select individual stocks in your Roth IRA or individual account.
About the Author
ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., the Wallet Doctor, is a successful investor. Dr. Brown holds a Ph.D. in finance. The Wallet Doctor is sought after for investment advice and coaching. For more information visit Dr. Brown’s site at www.BonanzaBase.com or sign up for his investment tips at www.WalletDoctor.com
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