December 14, 2006
90 Million Suckers Have Put $9 Trillion into Mutual Funds
The best investment advice you’ll never get, by Mark Dowie
John Bogle is the living scourge of Wall Street. Though a self-described archcapitalist and lifelong Republican, on the subject of brokers and financial advisers he sounds more like a seasoned Marxist. “The modern American financial system,” Bogle says in his book The Battle for the Soul of Capitalism, “is undermining our highest social ideals, damaging investors’ trust in the markets, and robbing them of trillions.” But most of his animus is reserved for mutual funds, his own field of business, which he describes as an industry organized around “salesmanship rather than stewardship,” which “places the interests of managers ahead of the interests of shareholders,” and is “the consummate example of capitalism gone awry.”
Bogle’s advice is simple and direct: those brokers and financial advisers hovering at the door are there for one reason and one reason only — to take your money through exorbitant fees and transaction costs, many of which will be hidden from your view. They are, as New York attorney general Eliot Spitzer described them, nothing more than “a giant fleecing machine.” Ignore them all and invest in an index fund.
Saint Jack is right, but we learn later on in the article that:
Only about 40 percent of institutional money and 15 percent of individuals’ money is invested in index funds.
It’s sad how badly most people manage their money.
December 15th, 2006 at 1:59 am
Thanks for the willitblend link - very good.
December 15th, 2006 at 2:05 am
I also think it is sad, but only for those people who truly being fleeced i.e, for those who aren’t aware of the costs, benefits and risks involved in making managed investments. I’m sure this is a significant percentage of the total, otherwise we wouldn’t see such aggressive, underhanded marketing by some of the funds.
But I also know of many university graduate friends who fully understand the concept of efficient markets, but who are happy to give their money to the likes of Fidelity to manage it for them. Are they insane? Maybe. But I don’t think they are really being conned. They know, but they don’t want to listen.
December 15th, 2006 at 10:21 am
Ugly: Thanks, I think that one will make my Top Ten Links of the week post.
Caravaggio: Right, there are plenty of people who “know better” but act stupid anyway. Also so many people have a twisted relationship with money to start, that they’d rather not think about it at all.
December 16th, 2006 at 7:57 am
CM: What part of the PNW will you be visiting? I live in Florida but originally from the Seattle area.
I don’t miss the rain……….but liked the Asian influence that permeates the culture there.
Have a safe trip and enjoy yourself.