Let us create a 3D eBook for you!
Let us create a 3d Digital eBook for you! DigyCat.com

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 The modern day mutual fund is like a remake of the movie "The Sting" where Paul Newman's character has been replaced by the fund manager!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

This RSS feed URL is deprecated

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

Retailers consider investing in online 'Costco for millennials' - New York Post


New York Post

Retailers consider investing in online 'Costco for millennials'
New York Post
General Mills and Bed Bath & Beyond are weighing investments in Boxed.com, The Post has learned. Big Apple-based Boxed, dubbed the online “Costco for millennials,” is suddenly among the hottest tech startups in the country because its network of ...

City school agency broke law, lost money by not investing - New York Post


New York Post

City school agency broke law, lost money by not investing
New York Post
The city's School Construction Authority stashed $104 million in a low-interest checking account for two years — losing out on hundreds of thousands of dollars by not investing the money elsewhere, as required by law, according to an audit released ...

SEC Says Bitcoin Funds Raise 'Investor Protection Issues' - U.S. News & World Report


U.S. News & World Report

SEC Says Bitcoin Funds Raise 'Investor Protection Issues'
U.S. News & World Report
FILE PHOTO: A collection of Bitcoin (virtual currency) tokens are displayed in this picture illustration December 8, 2017. REUTERS/Benoit Tessier/Illustration/File Photo Reuters. By Trevor Hunnicutt and Kanishka Singh. (Reuters) - The U.S. securities ...

and more »

CVS Health Reminds Us That Investing Is 90% Half Common Sense - Seeking Alpha


Seeking Alpha

CVS Health Reminds Us That Investing Is 90% Half Common Sense
Seeking Alpha
If the speculation that Amazon is taking over the world is imminent, will the major airlines soon be ordering their new planes online with two-day free shipping as long as they have a Prime membership? In all seriousness, many of the Amazon competitive ...

and more »

Tim Cook: Apple investing billions in US thanks to tax cuts - Axios


Axios

Tim Cook: Apple investing billions in US thanks to tax cuts
Axios
Apple CEO Tim Cook told ABC on Wednesday that Apple will now be "paying $38 billion that we would not have paid" under the old tax system, but will be paying less over time, which is "one reason why we can... invest over $350 billion in the United ...

and more »

Millennial Investors Want Perks and ESG Investing - Planadviser.com


Millennial Investors Want Perks and ESG Investing
Planadviser.com
The latest Spectrem Group report, “Millennial and Generation X Investors,” suggests these two generations are significantly more attuned to socially responsible investing than their older counterparts. In fact, survey results show more than half of ...

and more »

How to Pick Stock Investments - NerdWallet (blog)


How to Pick Stock Investments
NerdWallet (blog)
It's a dilemma first-time investors and grizzled veterans alike encounter. There are seemingly endless possibilities: In the U.S., there are more than 4,000 publicly traded stocks, 9,000-plus mutual funds and more than 2,000 exchange-traded funds, not ...

and more »

Stock market worst to first: 'Dogs of the World' strategy works - CNBC


CNBC

Stock market worst to first: 'Dogs of the World' strategy works
CNBC
I back-test how I would have done if I invested in a range of global dog strategies — the 10-worst, five-worst, three-worst or single-worst country) in every year. If you invested in the bottom five annual performers from the previous year — every ...

Google is investing in Indonesia-based Uber rival Go-Jek ... - TechCrunch


TechCrunch

Google is investing in Indonesia-based Uber rival Go-Jek ...
TechCrunch
Google is back investing in ride-hailing companies. The U.S. search firm and China's Meituan-Dianping are among the tech giants set to invest in Go-Jek, the Indonesia-based rival to Grab and Uber, a source with knowledge of discussions told TechCrunch ...
Google, Temasek investing in Indonesia's Go-Jek as ride-hailing rivalry deepens-sources Yahoo Finance

all 10 news articles »

LargeFriends.com - the best dating site for plus-sized singles!
SuccessfulMatchCentral.com - the best dating site for plus-sized singles!

PreLaunchX

MyIdeal Domain Is For Sale - $8,000 For Enquiries eMail Us

© www.MyIdeal.biz - 2012

home | site map | links