I think there should be mutual fund police …
We received a “book” in our office yesterday called Investment Review – What’s Around the Corner? Top Investment Themes of 2013 put out by BMO.
I picked it up, flipped it open and landed on page 63. OMG!
Let’s take a quick look at what I saw.
BMO Guardian Select Class Balanced Portfolio Advisors Series
There’s a paragraph titled, “How This Fund Works.” Here is what it says:
“This Portfolio provides a balanced portfolio by investing primarily in a mix of mutual funds invested in fixed income and equity securities.”
Under top holdings it lists 10 BMO mutual funds which make up 99.04% of the portfolio.
The only thing worse than a mutual fund is a mutual fund of mutual funds! Talk about hidden fees. I don’t think Interpol could figure out what the true costs are of this baby.
There’s another section which asks the question, “Why Buy This Fund?” Now this is where the mutual fund police should step in. Point #1 reads, “Investment is designed for capital preservation balanced with long-term capital appreciation.”
Did I happen to mention that the MER is 2.50%? (I’m not sure if they are also charging the MER on the funds they’re investing in but how can you claim to be preserving capital by charging 2.50%?). Isn’t there a law against this kind of thing? If not, there should be.
I didn’t bother going through the rest of the “book”. There was another 64 weapons of mass financial destruction outlined.
As I’ve mentioned many times, mutual funds are designed to guarantee that the mutual fund companies and distributors make money – not investors.
It’s ironic that every mutual fund ad says that mutual funds are not guaranteed and that past performance is no guarantee of future performance. Even that is a lie. Mutual funds are guaranteed, they’re guaranteed to make money for everyone involved – except you – the investor.
I wish there were mutual fund police who would clean this mess up once and for all.