Saturday, September 18, 2010

Mutual Funds: The Growth of a Tapeworm Industry

Mutual Funds: The Costs

The average equity mutual fund charges around 1.3%-1.5%.

Thanks to the power of compounding, a loss of 1.4% each year becomes a 50% loss in just 49 years.

(1 - 0.014)^49 = 0.50

Source Data:
FRB: Flow of Funds Accounts


EconomicDisconnect said...

Yeah, those fees are a killer!

Maybe you could finance them?

If you did not catch this last night, please tell me you have seen this scene from a funny film (skip to 1:30 mark)


Stagflationary Mark said...

Great scene!

As a taxpayer watching the government borrow trillions on my behalf as an attempt to prop up the economy and therefore the stock market, I get the sense that we're already financing those fees. Sigh.

Troy said...

In 1985 the baby boom was aged 22 ~ 38, peak was at 30
In 2015 it will be aged 52 ~ 68, peak at 60.

Stagflationary Mark said...


I very nearly posted a chart of mutual funds compared to direct ownership of stock. It paints a very similar picture (only with much larger percentages).

There are no doubt a variety of reasons for this, one of which would be the stellar performance of baby boomers' stocks in the 80s and 90s. What's 1.4% when you are earning 15%?

The implications of your baby boomer observation could certainly flatten or reverse the trend. I was just thinking today that I don't currently own any funds right now. At 46, I might be done. It is my plan to buy 30 year TIPS directly in February's auction (within my IRA). I also intend to die fairly broke someday as I exhaust my retirement savings.

Anonymous said...

I don't want to be the Pollyanna, but didn't we just say CAT wouldn't grow because China is done for?

I am thinking that the world ex-USA/Europe/Japan is taking off. (about time.) This will feed growth like this for a while - not stellar Asian export to USA growth, but more meaningful, basic trade and development.

If this is not a blip, of course.


Anonymous said...

defining my terms

"take off" = low steady, meaningful growth

mab said...


The CONgressional hearings are a cruel joke. A distraction.

Why is it that the fundamental issue (FRAUD!) is never discussed? I'll answer my own question - CONgress and the Fed are beholden to Wall St. and corporate looters. In the eyes of Wall St. & CONgress the fraud is a feature not a bug!

The trillions (literally) that Wall Streeters extracted from the system over the past 25 years are the result of pushing ponzi CONsumption debt. The ponzi debt issued by Wall St has CONtinually needed increasing amounts of Government & Federal Reserve support. The ponzi debt has never been able to support itself, yet CONgress & the Fed keep encouraging more of it. They are as guilty as their handlers on Wall St. It's an un-kangaroo court.

Under Allan Greensham and Bernanke, we have had an eCONomy that incentivizes (via bailouts) fraudulent credit creation. The results are as expected - a wealthy Wall St. and an impoverished Main St.

Consumption debt is the road to ruin and yet Greensham and Bernanke enabled Wall St. to pollute our eCONomy with it. Overwhelmingly, the only groups that has done well over the past two or three decades are the debt pushers and top corporate insiders - those that benefit from the redit fraud. Of course Greensham is doing well making six figures per speech too - tip money.

Deflationary depression is upon Main St. as a result of ponzi credit created by Wall St. supported by CONgress & the Fed. It's that simple yet Main St. is perpetually distracted and always fails to grasp the problem - the fraud.

Anonymous said...

can you please add either a feedblitz or feedburner widget so I can subscribe via email? thank you

Stagflationary Mark said...


Not to be a pessimist but... ;)

July 22, 2008
Caterpillar reports record sales, Q2 profit jumps 34%

"While North America remains depressed, and we've seen softening in Western Europe and Japan, Caterpillar continues to grow in emerging markets and in global industries like energy and mining," Chief Executive Jim Owens said in a statement.

What came next was not exactly pretty. I'm not saying it will happen again but CAT has regained all of those losses. The bigger they are the harder they could potentially fall, especially if Jim Chanos is right about China.

CAT 5-Year Chart

Stagflationary Mark said...


The trillions (literally) that Wall Streeters extracted from the system over the past 25 years are the result of pushing ponzi CONsumption debt.

When I turned bearish in 2004 I had but just one word on my mind... DEBT!

Stagflationary Mark said...


"can you please add either a feedblitz or feedburner widget so I can subscribe via email?"

I will give it a try. I found instructions to do it. Thanks for asking. :)

Stagflationary Mark said...

A "subscribe via email" option has been added. It hasn't been tested yet though.