For the greater part of this century, a bank's role was to protect the saver's money while at the same time making loans to people and businesses that needed it. Depositors were protected from the complex world of finance and could go on and enjoy life without worrying about it. Following in the steps of the fund promoters, bankers also started manufacturing their own family of funds. They are using bank branches as distribution networks in order to sell them directly to customers. Compared with traditional fixed and guaranteed products such as government and corporate bonds, the profits margins on mutual funds are much more attractive. The popularity of these funds has allowed promoters to raise prices resulting in an increased bottom line.
"The people handling your money now have more control over it and fewer controls over what they can do with it. In addition, as the people running our era of securitization they are providing absolutely no guarantee that what they do with your money will be successful. Leaders of pooled funds have all the control and they are compensated solely for their "best efforts". You carry all the risk, with almost no say in how the money is invested and, in fact, an increasingly limited opportunity to find out how it is being invested."
Chapter 4: The People Handling Your Money
Fund firms sponsor ads in newspapers and magazines. These inform readers that old age poverty will result unless an agressive investment program is begun immediately. Some of the sponsored magazines are even owned and operated by the companies selling the investment products. These high-pressure salespeople are not interested in helping you make your life easier. They just want your money. The fancy charts and graphs are marketing and sales tools that will try and convince you this is all a great idea. You be be skeptical and investigate the risk that is presented to you. This book takes the reader through an entire century of financial turbulence.
Donald Christensen lives in New York City and is the coauthor of Investing with the Insiders and publishes the respected newsletter, The Insider Outlook.