Ask The SEC

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Ask The SEC

Who is the SEC and why should I ask them anything? The Securities and Exchange Commission in Washington, DC is the government bureau that regulates the securities industry. They make the regulations that all stock exchange listed companies, brokerage houses and mutual funds must follow.

My readers know that I am a believer in the purchase of mutual funds for investment and retirement accounts. The reason is that very few people are qualified to choose stocks. Unfortunately that also applies to many mutual fund managers especially when you look at the performance of the majority of funds for the year 2000.

I can excuse the average Joe for not being able to pick winners, but I cannot excuse a fund manager who is paid huge amounts of money (always 6 figures and mostly 7 figures) to lose the cash of the little people who invest. There are 77,000,000 owners of mutual funds and 80% of them have less than $50,000 in their accounts. Why is anyone giving them their money to have them lose it? These are the "experts".

Yes, they are accountable to you, but there is only one way to make that accountability register and that is to close out your account. If you are losing money then take it away from your current "expert" and put it with a mutual fund that is currently going up. And when that one starts down you switch to another one that is going up. My experience shows you will not be changing more than about once or twice a year. But you will not give back 30% to 50% of your money by doing this.

You see mutual fund managers are paid not on performance, but on how much money they have in the fund. That is one of the reasons they always tell you to Buy and Hold. You buy. They hold. They make money. You don't.

Back to the SEC. Here is what you need to ask them. Why can't mutual fund managers be paid a percentage of the profits they generate rather than skimming a percentage off the top every year even when they lose the customers' money? I doubt you will get a satisfactory answer, as you can be sure the mutual fund lobby has more influence than you do. The same may be true if your Congressman were to institute that as a law. He gets campaign contributions from the lobbyists.

This rule is already being allowed for hedge funds, which are very similar to mutual funds; however, only rich people can buy these. Maybe it is time someone had the SEC look after the interests of the small mutual fund investors. If you get an answer please let me know.

Al Thomas' 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 at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Ask The SEC

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