George Morgan's Blog, page 29

Buyer Beware

At the close of his Wall Street Journal article Malkiel makes the statement that ”high fees charge for active management cannot be justified”. This is a blanket statement and I strongly disagree with that. First of all we have to come up with a mutually agreed upon definition of what constitutes a high fee. I would agree that there are those who were paying more than they should and don’t recognize it. However, after 35 years as they investment professional I can tell you that there are those...

Cost Of Funds Revisited

In Burton Malkiel’s Wall Street Journal column concerning the cost of investment advice, he points out that there are significant economies of scale in the asset management industry. It costs the same amount to buy 20,000 shares of a stock as it does to buy 1,000 shares. Filling an annual report with the SEC costs the same amount whether you have $100 million fund or $5 billion fund. His point is that the larger the fund, the lower the per unit cost. High volume is the reason Wal-Mart is able...

The Wall Street Journal On Index Funds

Yesterday I mentioned that one of the goals of the Buttonwood Center is to increase awareness of index funds. Imagine my surprise when this morning I opened up the Wall Street Journal and there was an article by one of the founding fathers of index funds, Burton Malkiel. The theme of Malkiel’s editorial is that investors pay significantly more for active management than they should. Back in the early 1970’s, when John Bogle created the first index fund at Vanguard, Malkiel published his major...

Do You Need A Tutor?

When I started the Buttonwood Center for Investor Education, my but original concept was that I would tell novice 401(k) investors about the advantages of index funds and be done with it. But, as I come in contact with more and more people I am coming to the realization that this is not about an event, but rather about a process. As an educator, I’m talking to a more diverse group of people than I was when I was a financial professional. The first step in working with this new population is t...

Home Improvement - Up Grading Our Website

Perhaps you have noticed that we have made some changes to our website. We have recently added a contact tab and hope that you feel free to connect with us when you have issues, either positive or negative. We now have more than 150 postings so we have added a search engine that will help you locate specific items or topics. We have added a tab for our 401(k) educational activities and we are in the process of expanding the information about these programs. Next on our list we will be a bibli...

The Bernanke Affect

The topic for this week’s Intelligent Investor is the potential damage, on some investments, that will occur when the inevitable happens and the Federal Reserve starts to raise interest rates.  Many companies whose stocks have performed well because of their higher yield are about to reverse course. Mr. Zweig even states that this reversal has already begun in some areas. The article goes through a whole litany of historical data illustrating his point. More important than what Zweig say...

Rules For 401(k) Success

I just finished reading a survey conducted by Charles Schwab whose title is “New Rules of Engagement for 401(k) Success”. Schwab is the world’s largest discount broker and provides investment services for 1.5 million 401(k) plans. There were several items that caught my attention. The first was that a majority of respondents felt that their 401(k) program was more confusing than their healthcare benefits. Another interesting finding was that currently 73% of all employers are providing some f...

Golden Opportunity

I am currently offering workshops on index funds as the method of choice for 401(k) participants, many of which are sponsored by small business owners. In the process of speaking to employers about this educational opportunity, I asked them what investment choices they offer. I am shocked by the number of times I hear “I don’t have a clue.” I’m sure part of the reason for this oversight is that small business owners have significant demands on their time.  But, that is a reason not an ex...