The Investor's Dilemma: How Mutual Funds Are Betraying Your Trust And What To Do About It
Praise for The Investor's Dilemma\ "Not since Graham and Dodd has an author defined investment principles as clearly as Lou Lowenstein in The Investor's Dilemma. Not only does he comprehensively dissect the ways careless and impulsive investors have been misled and cheated by self-serving fund managements, but Lowenstein names specific funds and techniques for careful investors to obtain superior results. This persuasive and extraordinarily readable book will be hugely helpful to present and...
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Over 90 million individuals, in 55 million households, own mutual funds. But while one in every two households has entrusted their life savings to these funds, the industry has betrayed their trust. Intent on gathering ever more assets, fund families spew out new funds—600 in just two years—while existing funds flip stocks and even managers, with a calloused indifference to your welfare. It works, at least for the fund families. And thanks to an intensive marketing initiative, some of them now have as much as $1 trillion under management. That's why Louis Lowenstein has written The Investor's Dilemma: How Mutual Funds Are Betraying Your Trust and What to Do About It. Based on fresh, cutting-edge research by a leading corporate critic, this book reveals how highly overpaid fund sponsors really operate, using, for example, narrow benchmarks that will make even a mediocre fund look good. Step by step, Lowenstein walks you through the conflicts of interest, and even outright theft, giving the reader an inside look at some of the best-known fund groups. Happily, Lowenstein also takes a direct, hands-on look at a representative group of tried-and-true value funds that have demonstrated a commitment to their investors' welfare. Instead of proliferating new funds every few months and diluting the results for those already there, this select group invests with patient research, holding their choices for years at a time and investing their dollars alongside yours. Along the way, Lowenstein discusses the important factors to look for when picking a stock fund. To illustrate the process, he analyzes two representative funds that are not too large and still open to new investors. Even as this book shines a harsh light on much of what is wrong with the mutual fund industry, it also helps illuminate the brighter corners of today's investment environment. Written in an engaging and informative style, The Investor's Dilemma skillfully examines the real problems within the world of mutual funds and outlines a value-oriented approach to this market that will allow you to achieve investment success.
Foreword ixPreface xviiAcknowledgments xxIntroduction 1Mutual Funds: A Painful Birth 7In the Beginning 7A Good Idea 11Cracks in the Good Idea 13Searching for Rational Investors in a Perfect Storm 17A Perfect Storm 17A Simple Survey 20The Fortune 10 Test 22The Performance Test 25Value Investing: A Behavioral Finance Perspective 36The Anatomy of the Stock Market 43The Stock Market 44Investing at Warp Speed 57Sell It All Every Year? 58Massachusetts Investors Growth Stock Fund 61Investing Blind 66Greed Is Good: The Appeal of a Publicly Owned Fund Management Company 69T. Rowe Price 70Profitability 71How to Make 80 Percent a Year without Breaking the Law 72Conflicts of Interest 75Grow the Assets 78Who's Watching the Store? 80The Greed Factor 82Candor Becomes a Casualty 85Form over Substance: Shame on the SEC 86The Failure of Candor Runs Deep 87As Good as It Gets? 92The Investor's Dilemma: Long on Life Expectancy, Short on Income, and Searching for Guidance 95A Crisis of Moral Imagination 95How the Other Half Lives... 102Everyone Agrees: We Are Frightfully Poor Investors 104And Now a Word from Pogo... 105What Pogo Forgot 106Of Bubbles and Swans 108Are You a Patient Investor? 117The Industrialization of Mutual Funds 119Margin of Safety 120Economy of Scale 121How the Marketing of Mutual Funds Came to Look like Soap 121Franklin Resources-A Study in Economies of Scale 125Industrialization 127Retailers, That's Where the Money Is 128The Death of Security Analysis 129Asset Allocation 132Rebalance My Portfolio ... You Said What? 133A Witch's Brew 137About Those Benchmarks ... 138Wrapping Up the Benchmarks 140Managing by Rote Can Hurt ... Badly 142Through a Window ... Darkly 145The First Story behind Those Numbers 147Multiclass Fund Shares 149Now Here's a Stealthy Way to Influence a Broker's Advice 152"Soft Dollars"?-Hey, That's My Hard Cash 155Revenue Sharing 156Corruption by Committee: The Story Gets Worse 159Devious and Deceptive? 161What's Missing from the Disclosures? 164Some Particulars 164Boards of Directors: Watchdogs or Lapdogs? 166Some Unresolved Questions 169How to Pick a Mutual Fund 173An Overview 173Back to Pogo ... and You! 174Buy a Mutual Fund? 178The Good Funds Fairly Shout Out Their Strengths 180What to Look for in a Stock Fund 181Price and Value 185Index Funds 186Two Stock Funds 189Notes 193Index 213
