I know from experience there is now a professional, well-trained elite, supported by large institutions, that is adept and willing to use corrupt practices to accumulate wealth. Despite assurances from game-theorists and anthropologists that the criminal cadre in the species remains a constant percentage over time.
It is partly, of course, simple stock market brokers and boardroom greed, a cousin to the greed and gargantuan rewards in entertainment and sports. It is partly the degradation of professional standards, of the concept of the fiduciary, akin to the same market-driven devolution in divergent fields such as medical care, Hollywood, publishing and, yes, journalism.
The majority for the riches of the techno-boomers and baby billionaires was way more than many titans of less glamorous industries could bear and in virtually all companies executive salaries soared beyond all proportions of the post-war era. And in many of those executive suites, greed morphed into felony -- Tyco, Enron, Rite-Aid, Adelphia, Global Crossing, WorldCom, ImClone, Lucent, KMart, MicroStrategy, Qwest Communications. And then scandals at the supposed auditors, like Arthur Andersen, insulted the injury.
So now we'll be told that the market, smarter than any deliberately organized system, will correct this. After all, who would invest in a known corrupt game? No one, so the market will make fix it. Plus, the regulators are on the case.
This time, I don't buy it. The predator class will not be exterminated by cease and desist orders, Senate hearings, independent boards of directors and the invisible hand. It's a culture. And essentially, it's our culture. Over the last several years, headlines in the business press proclaimed the coming demise of the mutual fund industry. The fees were too high, flexibility too low and shareholders had too little control over the tax consequences in traditional open-ended mutual funds. Exchange-traded funds (ETFs), hedge funds and separate accounts (which give investors direct access to money managers) were sounding the death knell for the 80-year-old mutual fund industry.
Most mutual funds have increased their industry and sector fund offerings in areas such as energy, financial services, health care or technology. Exchange-traded funds also are a popular alternative for clients concerned about the tax consequences of mutual fund investing. And mutual fund companies also are making more hedge funds and funds-of-funds available.
"The new after tax reporting is a much more effective way to allocate assets," says Carl Kunhardt, CFP of Quest Capital Management in Dallas. "There's been too much public misinformation, and individual investors have been led to buy the highest performing funds but ended up with less return than a more conservative fund after taxes."
In addition to the efforts by fund management, CPAs are getting another boon in helping clients manage investment taxes. The SEC-mandated aftertax performance reporting will spread across the industry this year. CPAs will now be able to compare apples to apples because a fund is required to report as a return what the investor actually takes home after paying taxes, not what the fund manager generates.
For example, Fidelity gives investors access to 41 discrete industries. Some mutual fund companies also are responding to the exploding demand for the absolute return strategies of hedge funds and private equity funds that invest in pre-IPO equity and other nonpublic securities.
Generally, having five to eight funds in your fund portfolio should meet your investing needs. The key to your strategy is figuring out your timeframe, risk level and asset allocation first before looking at fund categories and finally plugging in the actual funds.
It is partly, of course, simple stock market brokers and boardroom greed, a cousin to the greed and gargantuan rewards in entertainment and sports. It is partly the degradation of professional standards, of the concept of the fiduciary, akin to the same market-driven devolution in divergent fields such as medical care, Hollywood, publishing and, yes, journalism.
The majority for the riches of the techno-boomers and baby billionaires was way more than many titans of less glamorous industries could bear and in virtually all companies executive salaries soared beyond all proportions of the post-war era. And in many of those executive suites, greed morphed into felony -- Tyco, Enron, Rite-Aid, Adelphia, Global Crossing, WorldCom, ImClone, Lucent, KMart, MicroStrategy, Qwest Communications. And then scandals at the supposed auditors, like Arthur Andersen, insulted the injury.
So now we'll be told that the market, smarter than any deliberately organized system, will correct this. After all, who would invest in a known corrupt game? No one, so the market will make fix it. Plus, the regulators are on the case.
This time, I don't buy it. The predator class will not be exterminated by cease and desist orders, Senate hearings, independent boards of directors and the invisible hand. It's a culture. And essentially, it's our culture. Over the last several years, headlines in the business press proclaimed the coming demise of the mutual fund industry. The fees were too high, flexibility too low and shareholders had too little control over the tax consequences in traditional open-ended mutual funds. Exchange-traded funds (ETFs), hedge funds and separate accounts (which give investors direct access to money managers) were sounding the death knell for the 80-year-old mutual fund industry.
Most mutual funds have increased their industry and sector fund offerings in areas such as energy, financial services, health care or technology. Exchange-traded funds also are a popular alternative for clients concerned about the tax consequences of mutual fund investing. And mutual fund companies also are making more hedge funds and funds-of-funds available.
"The new after tax reporting is a much more effective way to allocate assets," says Carl Kunhardt, CFP of Quest Capital Management in Dallas. "There's been too much public misinformation, and individual investors have been led to buy the highest performing funds but ended up with less return than a more conservative fund after taxes."
In addition to the efforts by fund management, CPAs are getting another boon in helping clients manage investment taxes. The SEC-mandated aftertax performance reporting will spread across the industry this year. CPAs will now be able to compare apples to apples because a fund is required to report as a return what the investor actually takes home after paying taxes, not what the fund manager generates.
For example, Fidelity gives investors access to 41 discrete industries. Some mutual fund companies also are responding to the exploding demand for the absolute return strategies of hedge funds and private equity funds that invest in pre-IPO equity and other nonpublic securities.
Generally, having five to eight funds in your fund portfolio should meet your investing needs. The key to your strategy is figuring out your timeframe, risk level and asset allocation first before looking at fund categories and finally plugging in the actual funds.
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