Entries Tagged 'Investing' ↓

(part 1 of 3)

In my post, Fees in a Mutual Fund Prospectus: Three Ways A Prospectus Deceives, part 3,  we looked at how mutual fund fees can accumulate and take more than half of the total return on your investments. Over the past seventeen years many people realized this loss on mutual funds was happening. They’ve switched to investing in exchange traded fund (ETFs) instead.

Investors have caused the number of exchange traded funds to nearly double over the past few years.  Should you think about joining them? Well, yes, consider ETFs, but be aware of how complex these derivative products are.

Derivative products have no value of their own. Their value is based on other kinds of investments. Exchange traded funds are based on the value of a “basket” of stocks that are owned by an entity called a “market maker.” You buy rights to part of this virtual basket when you buy an ETF.

In this post we’ll see what an ETF is. In part two of this series on ETFs we’ll look at pros and cons of buying an ETF. In part three we’ll learn about market makers of ETFs and what risks are entailed in buying ETF products from them. Continue reading →

Along with investment banks, large insurance companies are major providers of 401k and 403b funds for employee retirement plans. Perhaps you have a plan with one of them.

A few years ago, I discovered a shocking secret about the mutual funds offered in insurers’ retirement plans. They are not mutual funds at all. They are proprietary derivatives based on mutual funds. I learned I’d been investing in derivatives!

401k and 403b derivatives: how I discovered I owned them

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(part 3 of 3)

Last time we looked at the list of fees within the “Fees and Expenses” section of a prospectus. There’s another misleading chart in this part of the prospectus. It’s the ten year fee table that purports to show the expenses on a $10,000 investment. You’ll find it in all mutual fund prospectuses. This is what happens in a chart called “Expenses on a $10,000 Investment.”

It’s easy to overlook the impact of fees when they’re divorced from earnings.

Continue reading →