“Smart Money” Knows How The Bread Is Buttered

Have you ever purchased something from a merchant and asked, "how much do you make on this?”  Probably not. What would the response be if you asked your financial rep to explain how much he makes on the mutual funds he has you invest in….especially if they are in your retirement plan? Better yet, what if you asked him to list all the costs?

The convention that exists to not ask what profit there is in what we pay for whatever we buy exists throughout society.  The pervasive lack of knowledge that convention causes fires up a business strategy that leads to gossip, innuendo, and fraud. Absent that convention, Bernie Madoff could never have built the humungous scheme he used to steal from so many.  Does “smart Money” know about the convention?  I know, a stupid question.  What does it do with its insight?  Homework.  It makes it its business to know the costs and the expected returns for any venture it considers joining, and it uses that knowledge to guide its financial behavior.

It has been said that no one ever got rich from mutual funds.  That notion must be quantified.  It should be said that no one got rich investing in mutual funds….many have gotten rich from them.  Who?  Those who collect the fees.  What fees? It’s time to do your homework.   Every investment has fees/commissions  associated with its acquisition.  Mutual funds are one of the few that charge both an acquisition fee and operating fees annually, especially in retirement accounts.  If you want to be “Smart Money”, you have to start asking “how much do you make on this”, and “what are the costs?”   Start with asking your financial rep.

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