Surviving Without Mutual Funds

STOP! Do not read another word! Advance mouse to Investopedia.com and look up advance/decline line. Do not pass GO. Do not collect another prospectus.

The NYSE advance-decline line has been positive for nearly six years! (Contact the Author for the Spreadsheet.)

What is wrong with the averages? How sick are the Mutual Funds? Here are some questions you should be asking. 1) Is there "Investment Life" after Mutual Funds? 2) What is the average investor/speculator to do? (3) Who can you trust? (4) Why are people still throwing money at the corrupt Mutual Funds? 5) Is there a safe(r) alternative? 6) Can a financial professional function without funds? (7) Did Mutual Funds make YOU lose money over the past several years? (Answers below.)

Investing always involves more questions than answers, and the idea that Wall Street has those answers and that they are imbedded in the products that they market to the "moneyed" public, is simply part of the brainwashing of the American investor. So, too, is the myth that Mutual Funds are a safer investment mechanism than a properly constructed portfolio of individual securities. Perhaps they should be, in concept. In reality, they haven't been for decades.

Investors have always searched for a safe and easy way to protect and to grow their portfolios. This used to be accomplished by applying a combination of management and investment principles to the process. A diversified portfolio of high quality, profitable companies, and an appropriate amount of less volatile income producers was pretty easy to create, to manage, and to monitor.

It still is, when you realize that investing is not a competitive event. The original Mutual Fund managers actually knew how to do this, were paid to do it, and were not at all influenced by the incredible confluence of outside forces that impacts their decision making today. In their original form, Mutual Funds were Trustee directed within the retirement benefit community, and a stepping-stone to a properly diversified, individual security portfolio on the personal level. Before the three-ring Wall Street circus came to town, there were only two "classes" of securities, retirement programs were not self-directed, the DJIA was an economic indicator, investing was a personal goal directed activity, and the Yankees won the American league pennant most of the time.

Almost everything (except the Yankees) changed with the onslaught of the "new generation" of Mutual Fund marketeers and self-directed retirement vehicles. Wall Street invented market prediction techniques and new subdivisions of securities; investment products were mass-produced in every shape, size, model, and color, with great financial planning success; sales literature was sold as research/analysis, and financial institutions became indistinguishable from one another. People pay extra not to collect current interest and loss-taking is seen as a good idea. Unproven team-player Mutual Fund managers receive signing bonuses that would shock professional athletes, and 60-second sound bites on CNBC define today's investment reality to the masses. A calendar year is now long-term, buy high/sell low a religion, and absolutely everyone, from accountants to wedding planners, can sell Mutual Funds for extra cash. Wall Street is Las Vegas in pinstripes and red suspenders.

Are today's late trading, market timing, and executive suite scandals going to change things dramatically? It's doubtful, simply because Mutual Funds are so profitable for the institutions, so mindlessly easy to sell for financial professionals, AND the only available investment medium for hundreds of millions of employees throughout the country! But is there a better way to invest safely and profitably in spite of all the problems? You can't afford to be lazy anymore. Learn how to manage a high quality, diversified portfolio of individual securities.

Steve Selengut