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Comparing Wall Street To Casinos Isn’t Fair – To The Casinos
- If you WIN at a casino, do you get ALL of your winnings – or does the casino take a ‘bite’ out of your winnings? You get it all. Do you get all of your ‘winnings’ with Wall Street when your investments go up? Nope. You may still have fees coming out – no matter what.
- If you LOSE at a casino, does the casino take more from you than what you lost? Nope. Does the casino charge you a ‘fee’ for losing your money – above and beyond what you lost? Nope. But Wall Street can – and often does.
- When you walk into any casino, you can ask for an ‘Odds Book’ that lists the odds of winning for each game in the casino. Does Wall Street have anything like this? Nope. You are on your own.
- If a ‘high roller’, professional gambler comes to the same casino you are at and starts making HUGE bets, does it affect your chip count when you are on the other side of the casino floor? Nope. But, if a billion dollar stock-picker (I am quite sure you know the names of a few of these folks) places HUGE stock trades, can it affect your stock account? Absolutely. Again, refer back to the 60 Minutes documentary above.
- If gambling causes you considerable emotional, personal and financial damage, you can join a Gambling Anonymous group or you can call a gambling crisis hotline, which carries an actual clinical diagnosis called ‘Compulsive Gambling‘. Does Wall Street have a system like this to help you during your time of need? Not a chance.
- The average cost of owning a mutual fund is 3.17% per year on a non-taxable account and 4.17% on a taxable account (directly from ‘The Real Cost of Owning a Mutual Fund’, Forbes, April 4 2011).
- With the help of fine print, the $13 TRILLION mutual fund industry is hands-down the most masterful in the craft of hiding fees. “Going back to your broker to help you save on fees is like going to your pharmacist to help you get of meds.“– Tony Robbins. Very true.
- 96% of actively managed mutual funds (aka: the advice from your mutual fund broker) did NOT beat the market, they are charging you an arm and a leg, and extract up to two-thirds of your potential nest egg in fees.
How This Affects Your Financial Planning
- Forecasting isn’t about predicting the market; it’s about marketing the prediction. As one newsletter guru told me years ago, “Given a choice between great marketing and great forecasting, I’d pick great marketing every time.”
- “I want you to imagine that someone comes up to you with the following investment opportunity: He wants you to put up 100% of the capital and take 100% of the risk, and if it makes money, he wants 60% or more of the upside to come to him in fees. Oh, and by the way, if it loses money, you lose, and he still gets paid! Are you in? It is a no-brainer. The only problem is that 90% of American investors that are invested in a typical mutual fund, believe it or not, have already agreed to these terms.”