Mutual Funds are Dead

You may have wondered why your mutual funds have been going down for the past 2 years. The answer is very simple, but not one you will hear from Wall Street as they want you to send money.

In order for stock mutual funds to go up you must have a bull market. Unfortunately, that bull ended 2 years ago and is probably not going to return for a long time. Yes, there will be short-term rallies that can last from weeks to months, but the downward spiral will continue. For the past 100 years the Price/Earnings ratio of the S&P500 index has a mean average of about 15. With the current P/E running about 41 the rubber band has been stretched too far and is now contracting toward a more realistic level. It will take a time, probably several years, for a true bottom to be reached.

Mutual fund charters require the fund manager to be fully invested at all times. The fund may be required to be invested in tech stocks, pharmaceuticals, automotive, Asia or some other specific category. If that particular sector is weak and almost all stocks therein are headed down the fund manager has nothing to buy and is not allowed to sell to put the money in cash or bonds to protect the investors. Some are allowed to buy and sell what they wish; others must invest in stocks of a particular index such as the Dow Jones, S&P 500 or the Nasdaq. Most of the fund managers today are too young to have experienced a bear market and do not know how or what to do.

The small investor today has been taught to believe that the stock market always goes up. From 1982 to 2000 it did, but that was the end. All the talking heads on radio and TV have been telling you to buy the breaks and that the market always comes back - except when it doesn't. Almost none of them has ever seen or even studied a major bear market. The last one was 1973-74 just about the time most of these guys were in grade school or high school. They haven't a clue and don't know when or how to sell.

Today there are trillions of dollars in 401Ks, IRAs, pension plans, etc. run by professional fund managers, financial planners, bankers, etc. who have no idea how to protect their investors. More trillions are getting ready to go down the drain. Last year 90% of stock mutual funds lost money. The Grim Reaper is now the manager of your mutual fund.

For the little guy, that's you, there is only one way to protect your money. If you are in one of those plans you can tell them you want to have your funds in a money market account. At least it won't go down. If there are any fixed income or bond funds available to your account that is another safe venue.

Mutual funds are no longer a good long-term investment. The age of the stock mutual fund is over. Dead. Don't let your hard-earned money get away.

Al Thomas' best selling 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 to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.

Comments to al@mutualfundmagic.com

Copyright Albert W. Thomas All rights reserved.

---

10 Tips For Creating Wealth From the Stock Market

1. Do not spread your money too thin.My friend has... Read More

A Penny for Your Stocks

According to Investopedia Inc. the penny stock market has seen... Read More

Dont Buy Worldcom! A Guide to Wise Bottom Fishing

Over the past few months, several investment professionals have brought... Read More

Understanding the Bulls and the Bears

If you've ever flipped on the television to CNN Financial... Read More

Is the Stock Market for You?

Many people would like to diversify their portfolios to expand... Read More

What To Buy Now

I am sure that if you have a brokerage account... Read More

Getting Even

I know there are a lot of you out there... Read More

The Secret Method to Selecting a Winning Trading System

Every successful trader has a winning system. There are of... Read More

Basics of Stock Market

Financial markets provide their participants with the most favorable conditions... Read More

Stock Market Volatility

In my opinion, due to the volatility of stock market... Read More

Hill of Hope

Just about now everyone is confused as to which way... Read More

Commoditizing the world

Let's discuss commodities; with the latest Enron situation, it is... Read More

Making a Stock Watch List

I am taking the time to help others learn the... Read More

Invest In The Stock Market For The RIGHT Reason, Using The RIGHT Choices

Invest in the stock market for the RIGHT reason, using... Read More

How Commodity Trading Differs from Stock Trading

There are major differences between trading stocks and trading futures.... Read More

The Holy Grail (of Investment)

Every year I go to the Money Show in Orlando,... Read More

Lifestyle Funds Provide Greater Security?

With the stock market stubbornly refusing to settle down and... Read More

Losses, not Profits, will Stop You from Trading in the Market

Should the market turn against you, it is important that... Read More

Price Targets

Every day in any financial publication you will find the... Read More

Economists #2

Economists know more about how the fragments of society work... Read More

VooDoo Training For the Stock Market

If you go to Haiti or other places in the... Read More

Understanding Stock Market Indexes

A stock market index is a statistical measure of changes... Read More

A Stock Market Investment Plan that Never Lets You Down

The bulls and bears of the stock market are both... Read More

Dividend Paying Stocks

I would like to share with the reader an article... Read More

Starbucks Stock is Up

Starbucks earnings are up again and so is their stock... Read More

Lemmings Are Gathering

Before they go over the cliff to their destruction these... Read More

Leverage - Margin Debt

What is leverage?Here is a definition of leverage from an... Read More

Mid-Cap Stocks: Asset Class with an Identity Crisis

Much like the middle child, mid-cap stocks have long struggled... Read More

Stock Market Investing: Knowing When (and when not) to Sell

One of the greatest challenges of investing in stocks is... Read More

Hedge Fund Advertising

Have you seen all those big full page ads for... Read More

Forecasting the Stock Market

Every day I see in the financial section of newspapers... Read More

How Much Money Can I Make With Trading? What Account Size Do I Need To Start?

What account size do I need?How much money can I... Read More

Value Investing: Selecting From The Bargain Bin

Picking a beaten-down stock requires a different kind of selection... Read More