A Quote by Charlie Munger
Mutual funds charge 2% per year and then brokers switch people between funds, costing another 3-4 percentage points. The poor guy in the general public is getting a terrible product from the professionals. I think it's disgusting. It's much better to be part of a system that delivers value to the people who buy the product. But if it makes money, we tend to do it in this country.
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The general systems of money management today require people to pretend to do something they can't do and like something they don't. It's a funny business because on a net basis, the whole investment management business together gives no value added to all buyers combined. That's the way it has to work. Mutual funds charge two percent per year and then brokers switch people between funds, costing another three to four percentage points. The poor guy in the general public is getting a terrible product from the professionals.
While it is probably a poor idea to own actively managed funds in general, it is truly a terrible idea to own them in taxable accounts... taxes are a drag on performance of up to 4 percentage points each year... many index funds allow your capital gains to grow largely undisturbed until you sell... For the taxable investor, indexing means never having to say you're sorry.
Wall Street, with its army of brokers, analysts, and advisers funneling trillions of dollars into mutual funds, hedge funds, and private equity funds, is an elaborate fraud.
To make the most of your money, I recommend sticking with mutual funds that don't charge a commission when you buy or sell.
Move your personal investments and retirement funds to socially responsible investment (SRI) funds that support only those corporations that uphold higher standards of behavior. Returns on SRI funds are usually equal to, if not better than, many of the well-known traditional mutual funds.
I think those who invest in mutual funds want someone else to do the thinking for them. But the fact that they can move the money around the family of mutual funds just through a phone call lets them feel that they can play tycoons.
There were two qualities about the mutual funds of the 1920s that made them extremely speculative. One was that they were heavily leveraged. Two, mutual funds were allowed to invest in other mutual funds.
The S&P is up 343.8 percent for 10 years. That is a four-bagger. The general equity funds are up 283 percent. So it's getting worse, the deterioration by professionals is getting worse. The public would be better off in an index fund.
Full service brokers, in this day and age of low cost mutual funds and discount brokers, are really nothing more than machines for ripping off retail investors.
I think we have in Germany too many sickness funds. We started with more than 1,000 sickness funds. But the fewer sickness funds there are, the less bureaucracy and the easier the system is to operate. But it is important that the best sickness funds survive.
We don't know what proportion of public funds is regularly lost to collusion and corruption. Is it 25 per cent? 30 per cent? We do know that a portion of these public funds are feeding organized crime.
I honestly believe that sound commercialism is the best test of true value in art. People work hard for their money and if they won't part with it for your product the chances are that your product hasn't sufficient value. An artist or writer hasn't any monopoly .... If the public response to his artistry is lacking, he'd do well to spend more time analyzing what's the matter with his work, and less time figuring what's the matter with the public.
Some analysts think people come into our shops and then go and buy the product on the Internet, but the manufacturer knows if the customer can't see the product and assess it, they won't buy.
When you diversify your mutual funds, you are diversifying something that is already diversified. Diversifying mutual funds is like taking high octane gasoline & adding water & then adding orange juice to it.
Even fans of actively managed funds often concede that most other investors would be better off in index funds. But buoyed by abundant self-confidence, these folks aren't about to give up on actively managed funds themselves. A tad delusional? I think so. Picking the best-performing funds is 'like trying to predict the dice before you roll them down the craps table,' says an investment adviser in Boca Raton, FL. 'I can't do it. The public can't do it.'
I do think there is a lot of potential if you have a compelling product and people are willing to pay a premium for that. I think that is what Apple has shown. You can buy a much cheaper cell phone or laptop, but Apple's product is so much better than the alternative, and people are willing to pay that premium.
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