Читать книгу Mutual Funds For Dummies - Eric Tyson - Страница 97

On some websites, various services pitch that you can invest in a chosen basket of stocks for a low fee — and without the high taxes and high fees that come with mutual fund investing. Like most political “Vote for me and not my opponent” ads, these services misrepresent both their own merits and the potential drawbacks of funds.

These “create your own funds” services pitch their investment products as a superior alternative to mutual funds. One such service calls its investment vehicles folios, charging you $29 per month ($290 if paid annually) to invest in folios, each of which can hold a few dozen stocks that are selected from the universe of stocks that this service makes available. The fee covers trading in your folios that may only occur during two time windows each day that the stock market is open. The folio service states that orders that are placed between 11 a.m. and 2 p.m. are processed starting at 2 p.m.; orders that are placed between 2 p.m. and 11 a.m. are processed starting at 11 a.m.

So in addition to the burden of managing your own portfolio of stocks, you have virtually no control over the timing of your trades during the trading day. (You can place traditional orders at whatever time the market is open, but you’ll be assessed an additional fee of $3 per trade.)

A site also says, “Mutual funds impose fees that can be very high — and hard to calculate.” I agree with that statement. However, without doing too much homework, an investor can easily avoid high-fee funds. For example, an investor can invest in the best index funds for an annual fee of 0.2 percent per year or less. Thus, an investor would need to have in excess of $150,000 invested through this folio service to come out ahead in terms of the explicit fees.

In addition, you need to be aware of additional fees. One folio service’s website says (in fine print, of course) that it “does charge for certain special services and does receive payment for order flow.” You must be ready to shell out the dough if you

 Want to wire money out of your account — $30

 Need a copy of a prior statement or transaction — $10

 Hold any restricted securities (which are subject to SEC Rule 144) — $75

 Close out an account — $50

The site further warns, “Note: These are today’s prices and fees, which are subject to change periodically.”

You’re simply not going to get the same level of service (and comfort) when dealing with a website-based service as you do when dealing with the leading fund companies I discuss in this book. The companies I recommend have trained representatives available by phone. Understanding and evaluating the performance of self-created funds is difficult, and unlike mutual funds, these funds have no standards or easily accessible services that report and track the performance of your customized folio (see Chapter 17 for more information on adjusting your portfolio).

It seems to me that folio services are geared toward those people who want to hold individual stocks, who trade a lot, and who seek to cap their annual trading costs. Although I prefer investing in the best mutual funds, you can invest in stocks of your own choosing — as long as you do so with a long-term perspective. But if you were going to simply buy and hold individual stocks, why would you want to pay a website-based service $290 per year?