As high fees, fat profit margins and the ability to maneuver in ways more regulated vehicles cannot draw especially talented money managers to he hedge fund industry, those left managing mutual funds are not as successful or worth it for investors, a Forbes columnist recently charged. “The typical mutual fund manager is an average Joe or Jane, whose assets are smaller, The small investor has less room for error and he or she tends to know little about investments,” writes Laszio Birinyi, Jr., president of Birinyi Associates, a financial consulting firm in Westport, Conn. “As the recent scandals showed, some mutual fund managers count on sticking it to the small investor.” Birinyi notes that performance for “the vast majority” of mutual funds lags the S&P, with large-caps faring far behind, yielding only 0.2% through Sept. 30, according to data from Lipper.  The culprit is complacency, according to Birinyi. “Funds are, alas, marketing machines first and investing ones second,” he said. Investors heed the buy-and-hold advice, he said. Meanwhile, fund managers collect the fees. “And what do you get for the fees you pay your mutual fund investor? Herd investing,” he said. Birinyi urges investors to build their own portfolios with stocks or exchange-traded funds, with their own interests in mind. For example, he advocates buying low, especially in the housing and energy sectors. “You don’t have to pay a mutual fund manager a fee to follow the herd, and you don’t have to give up 20% of your gains to a hedge fund manager, either,” he advised. “Be your own hedge fund manager. Buy stocks on your own.”   The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.