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The marketing behind mutual funds
Jack Bogle tells us why 100M people think mutual funds are good investments
Legal Disclosure: Tony Robbins is the Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity based on increased business derived by Creative Planning from his services. Accordingly, Mr. Robbins has a financial incentive to refer investors to Creative Planning.
If you read the last article in this series, you already know that Jack Bogle is a vocal advocate for transparency in investing and the end of the abuses of Wall Street. The Vanguard founder has built his fund – and his life – around the mission of providing low-cost investment options for the average investor. So he was easily able to address Tony Robbins’ confusion as to why mutual funds were still considered sound investments when the investor puts up all the money, takes all the risk and sees only 30% of the return.
Have you guessed the answer?
Mutual funds understand the power of marketing.
Over 100 million Americans have mutual fund accounts because they believe the glossy brochures and the media news that claim strong returns. But is that return really as good as you thought?
The advertised return is not the actual return. Fuzzy math might lead one to believe that 50%up, 50% down, twice over would leave the investor with a neutral return, but in truth they have lost 43%!
When a “sure bet” comes along, we all want to take advantage of the fund that has returned 20% to their investors. But Bogle makes it clear that “past returns will not recur.” Instead of riding the the emotional roller coaster of chasing past performance, discipline yourself to “just stand there.” The extra years of retirement will be a great reward.