Index Funds – The Newest Investing Scam

Posted on December 23, 2009
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Why index funds are your best choice for investing:

- they don’t try to time the market
- low management costs
- they own an entire segment of the market (or the whole market), so there’s no stock picking involved
- Study after study has proven that index funds are the best way to consistently grow your wealth investing in the stock market.

Money managers know this. Most of them can’t beat the index they’re trying to top, especially after the fees they charge you.

As more investors are switching to index funds, money managers are hopping on the bandwagon — but trying to charge their same, high management fees.

These new “closet index funds,” according to the Wall Street Journal, basically track the index, but are sold as actively managed funds in order to justify a higher management fee.

The Journal identified a handful of closet index funds:

Thrivent Large Cap Stock
Principal LargeCap Blend I
LargeCap Blend II
Dreyfus Fund
Dryden Large Cap Core Equity
First Investors Blue Chip
Nationwide Fund
There’s no beating around the bush here: this is a scam.

When you are being sold on the “expert advice” of a fund manager and they’re not doing anything a computer doesn’t already do for millions of investors, you are being cheated out of your money.

The managers may say that they’re trying to keep risk low by following the index, but this is not a legitimate excuse. There are plenty of options to do just that, and their costs are appropriate for the level of management they require.

Don’t follow the monkeys. Make your own investing decisions and know exactly what you’re paying for.

source: http://www.automaticfinances.com/investing-scams/

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