Monday, November 30, 2009

An Actual Case of the “Pot Calling the Kettle Black”

Seldom, from Wall Street, do investors ever get the plain truth. Wall Street is in the business of selling “free lunches” of which there is always a waiting line of investors unfortunately fighting for their place in line for the lunch.

The quote below is from Hedge Fund manager, Hatteras Group:

“Hedge Funds and Mutual Funds invest in the same ‘space,’
they just have different legal structures, and Hedge Funds are illiquid.”
Minneapolis Luncheon to RIAs, 9-30-09

Investing Lesson:

Based upon the above admission, why would you as an investor want to invest in the same thing as a mutual fund with the following negatives?

1. 3-4% annual fees vs. 0.5-2% for mutual funds
2. Limited SEC regulation vs. tight SEC review of mutual funds
3. Limited and inaccurate performance reporting
4. Limited liquidity

Said another way, Bernie Madoff sold Hedge Funds.

One of the primary benefits of working with a reputable, fee-only financial advisor is we are skilled at knowing what a trap looks like and adept at steering our clients away

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