By JLP | May 1, 2007
One of my readers sent me a link to a recent article by Rober Kiyosaki titled Playing the Mutual Fund Lottery. I can sum this article up for you in one word: DRIVEL! The point of the piece is that mutual funds (ALL mutual funds since he doesn’t make any distinctions) really aren’t much better than playing the lottery. Here are a few quotes from the article:
But isn’t there a better chance of making money in a mutual fund than there is in the lottery? Hardly. There may be less of a chance of losing all the money you put into a mutual fund than there is of losing all the money you put into lottery tickets, but you’re never going to win big in a mutual fund.
In fact, mutual funds are designed to minimize your returns by creating a “balanced portfolio.” If they could minimize the risk of the market itself, that might be OK. But the problem is that nobody can minimize the risk of the market without sophisticated hedge strategies that aren’t typically used in mutual funds.
“…you’re never going to win big in a mutual fund”
I’m thinking this could be the problem for most people: they all want to win big. What about winning smaller amounts over time? It’s the “winning big” mentality that hurts so many people over the long run. Why? Because they take on more risk than they should tyring to “win big.” Think back a few years ago when seemingly everybody was making a killing in internet stocks. I knew of a guy who retired from a long career and put ALL his money into Worldcom stock. He did this for no other reason than to try to “win big.” Guess what, he LOST BIG! He lost it all, or most of it and the sad part is, he doesn’t have a long career in front of him to make up the difference.
…mutual funds are designed to minimize your returns by creating a ‘balanced portfolio.'”
Huh? Not ALL mutual funds are balanced. Doesn’t Robert know this?
One final dose of hogwash:
If you don’t like the idea that most of the money spent on lottery tickets supports government programs, you should know that most of the earnings from mutual funds support investment advisors’ and mutual fund managers’ retirement.
You take all of the risk, you put in all of the capital, but most of the money goes to the fund manager and your investment advisor. Lottery funds go to worthy causes like schools and the arts, so which is better?
“You take all of the risk, you put in all of the capital, but most of the money goes to the fund manager and your investment advisor.”
MOST of the money goes to the fund manager? How so? Again, even if this were true of some mutual funds, it’s not true of all.
Personally, I think articles like this are representative of what you get from Kiyosaki – NOTHING. Go back and reread the article. Notice how he raises your curiosity but doesn’t give any answers. My guess is that you won’t get the “answers” until you fork over the money for one of his “coaches. Better yet, why not just play the lottery?