So, is that our homework? Simplifying this concept into a rebranding of “mutual fund”, where when potential investors hear this, instead of thinking “safe growth” which they likely do now, they think “lackluster performance.”

How about a play off the phrase “mutual”.

Mutual funds and wealth are mutually exclusive.

just thinking. except of course, who would run these ads?

Eric: a few good ones like Vanguard would no doubt jump on the chance to put themselves above everyone else Of course they offer mutual funds too so they might have to come up with their own label like “reliable funds” or “smart money funds”.

Eric, absolutely, if mutual funds came to connote “lackluster performance,” we would add many billions of dollars to the retirement accounts of Americans. If anyone knows any philanthropists who’d rather combat mutual funds than hunger or malaria, let’s sign ‘em up and get to work.

(Of course, if people started stock-picking, instead of just dumping their cash in index funds, we’d have a whole new set of problems…)

Richard’s right that Vanguard would be a clear beneficiary of this idea — it is one of the few companies that doesn’t charge exorbitant fees (even for its mutual funds).

“The evidence says that people who buy mutual funds retire a lot poorer than if they’d simply bought index funds.”
I think the thing is that this is not true for everyone. Many people have made more money than traditional index funds. For example, investing in a globally balanced fund would have been more profitable over the last ten years than the S&P 500 funds. So, the natural optimism of some people leads them to believe that they be part of the people that do better than average. They at least want to try to do better than average.

A bigger issue with this is that it is not a “fundamentals” based investment approach. For no reason other than the size of the company, index funds dump tons of money into the market every month. It produces a non-results based market distortion. Small companies need investment too.

What disappointed me most about this article was how the data was cherry-picked and presented as apples-to-apples. Obviously a bond fund is going to underperform when compared to an equity fund. Plus the data is only accurate up to 1998 — near the top of the inflated tech bubble.

Other information that is easy to find:

*people who invest on their own average returns of 3%
*people who invest with someone who is not family have returns 2.5x greater than those who invest with family
*people who use asset allocation strategies to invest their money have higher overall returns and less volatility than those investing in index funds