Web Site: http://www.thefinancialcoach.com
Bio: Entrepreneur, author, advisor and radio show host focused on cutting through the wall street deception in an attempt to bring facts, reality and success to investors. Visit for financial planning resources at www.thefinancialcoach.com
Posts by binkbryan:
Lost Decade of Stocks? Is The Market Different Now? The Truth of The Last Ten Years
November 19th, 2011The Financial Coach, Bryan Binkholder examines the common held, popular notion that the stock market has yielded flat to negative returns for the last ten years after substantial drops in 2000 to 2002 and then again in 2008. Could these ‘talking points’ of insurance & bond salesmen and misguided members of the press actually be paralyzing our future and our view of markets? Examine the facts and great information The Financial Coach shares from William J. Bernstein’s book ‘The Investor’s Manifesto.’
Mutual Fund Advertisements: Deception Galore!
September 28th, 2011The Financial Coach Bryan Binkholder examines Columbia Management’s Mutual Fund advertisements to financial professionals and individuals. Watch this short clip and see how what appears to be dramatic proof of their success is actually a condemnation of their failure!
Mutual Funds Exposed: Misleading Returns and Expenses
September 8th, 2011The Financial Coach Bryan Binkholder examines the biggest problem facing investors as they are ‘pitched’ mutual funds by financial salespeople (advisors).
In today’s post on mutual funds I want to draw your attention to that sneaky little thing called ‘the fine print’. The crazy thing is, mutual funds love to talk about how great their returns have been but most investors fail to realize what the tricky wording actually means. We’re going to dig into that today.
Examining the Disclaimers and Clever Wording of Mutual Funds
Today’s example includes Columbia Management and their Columbia Select Large Cap Growth Fund, along with Schooner Funds Growth & Income mutual fund. As has been proven in research, including Worthless Warnings (Journal of Empirical Studies 2010) and Star Creation (Palmiter 2009), investors are mightily swayed by advertising focused on returns and star ratings.
To show you how dishonest funds cover themselves with legal disclaimers, let’s take a look at my two examples:
Schooner Funds Examined
Mutual Fund Decoding 101 High Future Costs
Schooner funds launched in August of 2008 as the market was plunging. What a prime time for a fund to emerge that promised to capture returns no matter what the market was doing. Who could resist that? Unfortunately, study after study has revealed that the only thing that matters is costs when it comes to investing since markets are efficient and 90% of the trading is done by institutions (mutual funds, pensions, hedge funds).
Consequently, a manager may experience luck or a mutual fund family may create the illusion of success, but at the end of the day the horse carrying the lightest jockey will win the race. Schooner conveniently post great returns in their ads by utilizing a ‘contractual waiver’ of management fees. What is a contractual waiver and how does it affect investors? Here’s the break down.
The Fine Print – By looking closely at the fine print of Schooner’s ads, you will see their returns are based on a management fee charge of 2% while the actual operating expense is 7.99%. This second amount is cleverly disguised because it is contractually waived until 8/29/11. By postponing that expense, the ad can claim the much lower, more attractive fee. Wait, there’s more! What you’ll also see is the sale charge of 4.75% that is imposed by financial advisors, also conveniently not factored into the advertised returns (unless you look closely at the part of the ad that spells those costs out).
This is just one of the reasons why advertisement and returns should NEVER be considered valid because of all the shady details and the impact of calendar days. Just imagine if the tracking period started on a day the market had a significant jump of 5% instead of a day when the market was down 5%. This is why Bill Miller of Legg Mason Value Trust, who was considered the smartest stock picker out there when the Wall Street Journal did a feature on him in January of 2005, said his success was actually 95% luck and it could have been vastly different if a different set of calendar days had been used.
Columbia Management Examined
Columbia Management Sept 2011 1 page Advertisement
Now let’s move on to Columbia Management. In a recent full page ad directed towards financial advisors, which appeared in Investment Advisor Magazine, Columbia focused on the incredible success of their Large Cap Growth Fund, an unbelievable 49% one year return!
Unfortunately, it actually is unbelievable. Here again the small print tells us what we really need to know.
1. The 49% fund return is a reflection of fee waivers and expense reimbursements, much like the Schooner Fund example shown above.
2. The recent growth in the stock market also helped produce short-term returns for some asset classes that are not typical, and may not continue in the future.
Can we be real for a moment? What they are really saying is this fund happened to hold some stocks that experienced incredible success, period. They know this pattern will not continue, but in the meantime they are going to make the most of it with huge advertising campaigns, while pushing advisors to sell the heck out of this fund!
Don’t Be Duped By Advertisements. Stick to the Proven Basics
So what can we learn? Believe nothing you read in advertisements for mutual funds or stock pickers. If they’ve done well we hear about them but what about all the losers out there? Every stitch of research has also shown that any winners will undoubtedly have their run of losing choices at some point in the future, so stick to the basics. Don’t gamble with your investment dollars.
Low cost index/ETF funds in a broadly diversified portfolio covering large, small, micro companies in the U.S. and internationally, commodities, emerging countries, value companies and treasuries.
Once you’ve got your allocation, stick with it through thick and thin. Turn off the news and realize markets are volatile over short periods of time but remarkably predictable over longer periods. Long term investments will pay off every time.
For more investment insights, be sure to take advantage of my two free resources, 7 Deadly Traps of Investing and The Six Pitfalls of Retirement Planning. They bring clarity to the most common investment mistakes and explain more about hidden fees, conflicts of interest, and how to avoid these pitfalls.
Investing for Inflation Protection or Deflation or End of America or Whatever You Think May Happen
September 6th, 2011The Financial Coach Bryan Binkholder and Jim Winkelmann of Blue Ocean Portfolios describe how you as an investor can build a portfolio to defeat inflation or deflation or whatever you think may happen. The two also discuss The End of America (losing the reserve currency status), silver prices, President Obama and the possibility of a great depression or hyper inflation. Wow. 11 minutes that will educate and give you confidence!
Debt Crisis & The Markets: Is Now The Time To Sell?
August 3rd, 2011The Financial Coach Bryan Binkholder examines what the last weeks roller coaster ride for investors means and what you can do about it. Many are calling for exiting the market or moving into bonds. Is that the right move? What has the market done and where will it go? Could market timing (getting in and out) be our Holy Grail?
Check it out and leave a comment to tell me what you think!
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