Mutual Funds for the Utterly Confused: Politics of Social Investing
In a paper titled “Effects of Poll Reports on Voter Preferences” focused on voters prior to a primary, in this cause, the Republican primary in 1996. Potential voters were given bogus information about where a candidate might have been in terms of voter popularity based on polls. Ironically, polls have never so dominated the presidential election just past. Reportedly, the increase of polling information tripled in the short span of eight years, from the 2000 election to the election of Barack Obama.
This is why invest in mutual funds. We are not perfect filters for all information. We have psychological roadblocks that we encounter when we try to make even the most informed (and often important) decisions of our lives. When it comes to mutual funds, we tend to drill down to some basics, especially when it comes to equity mutual funds.
Are they winners, short-term, long-term, whatever?
Is the fund inexpensive compared to its peers?
How much does it cost to get in?
But there is so much more and chapter nine begins with a look at the fund manager, be it a woman, man, group of aforementioned, or a computer spewing out algorithms. At the heart and soul of your fund is a manager (or team) with a charter in hand and a singular goal in mind.
And of course, with that comes the sales pitch.
Not to stray to far from what we are doing here (giving you a little more insight into some of the topics I brought up in the book, Mutual Funds for the Utterly Confused) but many of you have a dim view of what funds have done of late. And you would be only half right in blaming many of the funds and managers behind their investment strategy. The rest of the blame lands with you.
You made choices when you bought those funds, believing, if only part of the quote on page 97: “If you are not making mistakes, you’re not taking risks.” Only most of us never questioned the possibility that we might be making a mistake. Pinching our collective selves as we wondered if this might be too good to be true was not even a consideration as we loaded up our portfolio with riskier and riskier bets, narrowing our diversity down, sometimes so narrow as to chase commodity or sector funds that were focused on balancing on the head of pin.
As I said, this is something you can correct in the future. I often tell folks that I am unable to fix something mechanical because I have no idea what right looks like. In the chapters ahead, I give you the template for what right looks like and you can fix what you have based on that template.
