| ehos |
Everyone should go out and read Berkshire Hathway's anual report.
" In 2006, promises and fees hit new highs. A flood of money went from institutional investors to the 2-and-20 crowd. For those innocent of this arrangement, let me explain: It’s a lopsided system whereby 2% of your principal is paid each year to the manager even if he accomplishes nothing – or, for that matter, loses you a bundle – and, additionally, 20% of your profit is paid to him if he succeeds, even if his success is due simply to a rising tide. For example, a manager who achieves a gross return of 10% in a year will keep 3.6 percentage points – two points off the top plus 20% of the residual 8 points – leaving only 6.4 percentage points for his investors. On a $3 billion fund, this 6.4% net “performance” will deliver the manager a cool $108 million. He will receive this bonanza even though an index fund might have returned 15% to investors in the same period and charged them only a token fee.
The inexorable math of this grotesque arrangement is certain to make the Gotrocks family poorer over time than it would have been had it never heard of these “hyper-helpers.” Even so, the 2-and-20 action spreads. Its effects bring to mind the old adage: When someone with experience proposes a deal to someone with money, too often the fellow with money ends up with the experience, and the fellow with experience ends up with the money." |
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| ehos |
| Mutual funds are a scam. But like lemmings, everyone buys them. |
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| Thalo |
| Do you have a better suggestion for someone to invest a $5000 RRSP in a diversified portfolio? |
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| Playa |
quote:
Originally posted by ehos
Mutual funds are a scam. But like lemmings, everyone buys them.
Index funds are mutual funds. Index funds and most mutual funds will never out preform the index.
Very seldom a mutual fund will out preform the index. Usually it is purely by luck.
Hedge funds must out preform the index.
Mutual funds are a great way to diversify your risk and your portfolio. |
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| ozzmodan |
quote:
Originally posted by ehos
Mutual funds are a scam. But like lemmings, everyone buys them.
There are a few mutual fund managers out there that are still doing good work, you just have to do some research rather than throwing money blindly. Morningstar has some good tools to filter out the bajillion bad funds out there.
Kyle |
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