FEES, FEES and more FEES!
What to lookout for.
I just met with a prospect that asked me to review his portfolio. The statement contained a bunch of Russell funds, which appeared to be an attempt to diversify the client. I asked what is the advisor charging you to manage the account, it turned out to be 1%. OK fine. Now what about the internal expenses of the funds. He didn't know. I showed him it varied from .77% to 2.11%. That's on top of the 1%! Next it's off to turnover ratios, they were anywhere from 78% to over 300%!! That's high and that's where the manager makes money for the fund not the client. He makes the difference between the bid/ask on all trades. Next we looked at his diversification. That was all over the board, overloaded in large cap and little small cap and small cap value which is where the best performance comes from. You can't truly diversify with actively traded mutual funds. You never know what you are getting into. Please investors check with me before you leap into a group of actively traded mutual funds, they're expensive and uncontrollable for asset allocation.