If You Were Told You Could Lose All Your Money!
Recently, I received a prospectus from a very well
known mutual fund, and when I decided to read it my heart sank. I got scared. The prospectus was worse than reading a mystery novel. Here's what I saw.
On the first page (cover) down at the bottom read in quotes "These securities have not been approved or disapproved by the Securities and Exchange Commission, nor has the commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense."
As if this was not bad enough the next paragraph was equally as frightening. It read " Shares of the Funds are not deposits or obligations of, or guaranteed or endorsed by, any bank or depository institution, are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other agency, and involve investment risk, including possible loss of the principal amount invested."
Why in the world would intelligent people give any mutual fund their money when there are disclaimers that tell you that what they are doing is not even approved by the Securities and Exchange Commission? Furthermore, the deposits are not guaranteed or endorsed by any bank or depository institution which this means, as we saw during the last crash in the market, that when you go to bed at night when you wake up you could be broke.
After reading the index of the booklet, the next page covers the overview. There once again was the horror. The prospectus read " This prospectus describes Funds in (the name of the fund). Each fund has its own investment objective, risks and opportunities. You should consider each Fund separately to determine if it's appropriate for you. No single Fund can provide a complete or balanced investment program, and there is no assurance that a particular Fund will achieve its investment objective."
Wow, I guess that everyone who puts money in these mutual funds has so much money that they can afford to lose their money. If that's the case, they should give it to charity. They can at least get a tax deduction for the gift.( I am making a joke here but, the fact remains, the people were told they could lose and they did.)
After flipping through the prospectus I came upon a section on risk. Five pages were devoted to explaining the risk relative to:
Stock market risk
Small company risk.
Debt risk.
Interest rate risk
Credit risk.
Prepayment risk
Junk bond risk
Foreign market risk
Emerging market risk.
Diversification risk.
Portfolio turnover.
The point is that people will argue and fight to discredit financial products that give them growth and steady safety and defend products that tell them they can lose their money, with page after page stating that they will lose all of their money and disclaimers that tell them that what they are doing is not even approved by the regulatory agency that is supposed to keep it safe for the consumer. One wonders how they are able to get massive amounts of money from the people. There is horror story after horror story about people losing massive amounts of money, but yet people still give their money to people who tell them they can lose.
Buyer beware is definitely a case here if there ever was one.
Whose side do you think the financial institution is on? Do they care about the consumer? Shame on the salespeople who tell only one side of the story to get the consumer's money. I am sure that I will receive lots of email from financial planners, financial institutions, and others that favor the traditional side of finance telling me that I am wrong. My answer is read a prospectus. Defend it however you want, with what ever spin you choose. The fact remains the mutual funds are telling anyone who can read, that they can lose your money, and if they do its your fault for giving it to them. I don't care how much untruthful information the advertisers put out, people can still lose.
There are many nontraditional strategies that are available which will out perform mutual funds. Feel free to contact us and we will tell you what they are.
Dr. Raymond Jewell
Host, FinancialFreedomRadio.info
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Raymond Jewell PhD
610-637-4884
Skype: rbjewell
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