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I have recently been contacted by a gentleman who has a large financial Internet web site devoted to mutual funds and he has asked me to act as an editor. He sent me a list of mutual funds and asked me to list them into 53 categories.
"Gee, Ken, thanks for asking, but I only have two categories." He was baffled. "What about Large Cap, Mid Cap, Small Cap, Sector, Index, Emerging Market, Value, Undervalued, Balanced, Closed End, etc. etc. funds? What about all those Wall Street "professionals" who say we should analyze our portfolios and put money into different funds?"
The answer is very simple. Don't listen to those "experts". The only expert is the bottom line.
My two categories are those that PERFORM and those that are NONPERFORMERS. How do I differentiate them? Again, a very simple test. The performers are beating the S&P500 Index and the nonperformers are not.
When you purchase a mutual fund what are you getting for your money? You are hiring a mutual fund manager who is supposed to be able to pick individual stocks for the fund that will increase in value to make your investment go up. Not down. Not sideways. If the fund manager cannot do that he should be fired. The S&P500 is merely a market average and an average job by a fund manager is staying even with it. If anyone you hire for any job cannot do an average job would you continue to employ him? Not really. Yet in 1998 only 319 of 8,520 mutual funds had managers that were able to beat the S&P500 index. Pretty pathetic.
So what do all the categories mean? Basically, nothing. This is more Wall Street smoke and mirrors trying to confuse you to look at what the magician wants you to see while he is fooling you with his act. You watch his right hand while his left hand is dipping into your wallet. Wall Street hates me because I tell the truth. They want to work their magic on you with their convoluted ways. Simplicity is very difficult for twisted minds.
Whatever funds you now own should be reviewed monthly and compared to the performance of the S&P for the last 12 months. Only12 months. Not 36 months. Not five years. Remember the admonition, "What have you done for me lately?" Fund managers run hot and cold and you don't want to stay with him when he has a cold streak.
When you have your account with a discount broker most have funds that have no transaction fees or the fee is very small to switch to a better fund. If you don't watch out for your money I guarantee your broker will not and you will be left with a small sum in your bag instead of the riches you deserve.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at
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