A Safe Port For Mutual Funds But Not You!

Soft dollars, a form of legal kickback, is a sly way you can get ripped off by mutual fund managers. Full service brokers give these kickbacks to non-indexed mutual funds in the form of a "rebate" to purchase research, software, and even computer equipment.

You pay for these soft dollars! In recent years, the SEC estimated that soft-dollar deals exceeded $1 billion. Typically, $1 accrues for every $1.60 of brokerage commissions paid. Congress made these kickbacks legal in 1975 when it passed the "safe harbor" law. The legislation allows fund managers to pay more in commissions than is necessary, as long as the excess comes back in the form of services or research that benefits investors.

The problem is that this has created an opaque system that can be abused. In 1998, the SEC found that some money mangers were using soft dollars to pay for salaries, office rent, and even vacations! Think about this. You sweat every day at work to make a living. You buy a mutual fund to secure your retirement. Then the person who is supposedly protecting your retirement is sipping Margaritas in Cancun discussing with his or her buddies where to buy their next mansion with your retirement dollars!

The second problem is that many funds are not taking advantage of cost saving efficiencies in their operations just so that they can keep the soft-dollar spigot open. Think about this as well. If you had enough money to not have to work you would spend a considerable amount of time looking for safe places with a good return for your money. You would not waste money on things your family did not want and hence did not need. Why give your money then to a mutual fund managers who could care less if they waste some of your retirement dollars; its no skin off their back! The best way to avoid these losses altogether is to restrict your purchases of mutual funds to your 401(k) and try to only buy indexed mutual funds such as 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

---

CYA

You all know what CYA stands for. Of course, Cover... Read More

Why You Need To Buy and Sell Gold Coins (Part 6)

Pre-1933 Gold Outperforms Today's Gold Bullion...Since 1970, an investment strategy... Read More

Using Divergences to Keep Out of Bad Trades

The American Football season just came to an end with... Read More

Wit and Wisdom on Money, Wall Street and Success - Part #2

Here are ten more WISDOM packed GEMS that ooffer very... Read More

College Savings Plans ? Are They The Best Choice For My Child?

College Savings Plans ? are they the best choice for... Read More

Powerful Options Basics Lessons Improving your trading in 180 days.

An option is a traded security that is a derivative... Read More

Trading Tips No 7: Developing a Casino Mentality for the Day Trader

I submit that the successful day trader would profit well... Read More

How To Find An Investment Advisor

Do you think you need an Investment Advisor? Hold on... Read More

Everybody Wants to Know How to Invest

Those unfamiliar with the process of making and managing investments... Read More

Why You Need To Buy and Sell Gold Coins (Part 2)

How to Collect Rare Coins For Fun and ProfitTime has... Read More

Commodities - The Next Big Wave of Fortune Building

Have you often wished you could have got in on... Read More

The Past Does Not Equal The Future: Mutual Fund Returns!

A way that investors get ripped off and in a... Read More

Evaluating A Money Manager

Scams and frauds are designed to take your money through... Read More

Why the Rich Keep Getting Richer

Rich people: fortunate, lucky, selfish, and arrogant? Or highly educated,... Read More

It?s Not the Size of Your Bank Account

You might think that if you win the lottery or... Read More

Guru Focused: Robert Olstein?s Short Sells

While it is rather rare that value gurus sell stocks... Read More

Seven Investment Terms Everyone Should Know

For those who have never given their financial future a... Read More

Begging Your Trust in Africa

The syntax is tortured, the grammar mutilated, but the message... Read More

Invest or be Pink Slipped

Firing an employee seems to be easier and easier for... Read More

Need To Trade!

You don't HAVE to be trading.As a novice trader, you'll... Read More

Forex Trading Best Practices

FOREX, the term for the FOReign EXchange market, is an... Read More

Straddle Strategies in Option Trading

The straddle strategy is an option strategy that's based on... Read More

Options Education : Opinion versus Fact!

The most basic aspect of trading is learning to differentiate... Read More

Press Release Scams and Successes: Reading Between the Lines

Press releases are a means through which companies can keep... Read More

Annuity Investment - The Whole Truth

Do you ever feel like you haven't been told the... Read More

Trading Systems

A trading system consists of a set of rules for... Read More

Who Wants To Be A Millionaire?

I am sure you have probably read about the power... Read More

Trading For A Living - Part 2

In part 1 of this article I started to look... Read More

Focus Your Investments on the Long Term

"All human power is a compound of time and patience!"... Read More

Pros & Cons of Investing in Bonds

What are Bonds?A bond is a debt security, by which... Read More

Use this Simple Trick its to Buy $100 Bills Direct from your Bank for only $97

Most People just don't understand the power of using their... Read More

Will a Falling Dollar Derail Your Plans for Retirement?

How much are you willing to pay for a tank... Read More

Boost Your Income With Financial Spread Betting

About 6 years ago I started to notice that certain... Read More