Rick Ferri says “Mutual Fund investors should Occupy Boston”


Following all the Occupy This and That out there (WallSt, mainly, but there are satellite protests), Rick makes some great points.  They’re the same ones he makes on a regular basis, but it’s still nice to see them tied down so cleanly.

Summary – the mutual fund industry has been raking in huge amounts of money for not doing a particularly great job.  Most funds are actively managed, have high expenses, don’t add any value over an index.  The industry comes out with new funds all the time – the fund flavor-of-the-day and quietly closes down all their failures.  Meanwhile, low costs indices outperform the vast majority of those funds.

Rick points, of course, to Vanguard as the poster child for the low-cost indexing approach, but he’s willing to grant that there are other managers out there, too.  And Rick uses both ETFs, and more traditional open-ended mutual funds (as well as the occasional individual security) in the portfolios he builds for clients.  But mostly, ETFs.  His selection process generally starts with choosing asset classes and asset sub-classes first then finding the best funds, ETF or otherwise, to use to implement that asset class/sub-class selection.  And that’s a great strategy.

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