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Subject:  Re: Questions for a story Date:  3/22/2004  3:07 PM
Author:  telegraph Number:  39947 of 88435

THe flaws of many mutual funds are that they are sold by 'brokers' who make a nice commission selling them. Load funds, and funds with high 12b-1 fees (that compensate the manager for years after you buy it) are the way to lose lots of money.

People have advocated for years the use of no-load extremely low expense funds such as Vanguard.

Other fund families played loose with their funds, allowed some to trade late, or jump in an out, causing others to lose money, or not make as make.

When funds were spinning off 20%/yr growth, no one really worried about 5% loads, or 2% annual fees....all the folks 'were making money'. Now that returns are likely to be 6%/yr, that 2% takes 1/3rd of your gain.

it is marketing....some folks are willing to pay list price for a car..and then add on full cost 'undercoating, paint sealant, and fabric protectant' and 'extended warranty' coverage to further enhance the dealers profit.

Bernstein has an interesting saying on the back of Four Pillars of Investing....'a stock broker services clients like Bonnie and Clyde serviced banks'....... and it is stockbrokers who pitch mutual funds to their clients.


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