Too Many Managers Add To Fund Expenses

In their zeal to find the perfect recipe for financial success, mutual fund investors these days can easily make the mistake of hiring too many cooks.

Thanks to the proliferation of services offered in the marketplace, it’s quite possible now to hire a manager to pick other managers who choose among still other managers.

Maybe all these people are smart, experienced thinkers with the savvy necessary to add value to the effort to make your money grow with a sensible approach to risk.

But they all, understandably, insist on getting paid for their efforts. And each fee, commission or other charge they collect steepens the hill your investment must climb to earn you a decent return.

Amid all the choices available to the investing public heading into the late 1990s, the danger arises that one of the main reasons has been forgotten for investing in mutual funds in the first place.

The original idea of a fund, after all, was to relieve individual investors of the burden of picking individual securities by pooling their money and putting it in the hands of a professional manager.

The expertise thus obtained, along with the protection of diversification that a fund portfolio provided, justified the expense of employing the manager. For even further diversification, individuals could spread their money among several competing funds with different managers.

It’s not at all inconceivable today that you might retain an adviser who would steer your money into a variety of funds investing in other funds. And who knows - especially in a roaring bull market like the one that has prevailed the past two years, you might possibly do quite well.

But it’s also possible that you might start to suspect you have overcomplicated the process. You might have stumbled into this bog, indeed, simply through a failure to think clearly at one or two points along the way.

The intent here isn’t to denigrate any type of financial adviser. But it is to suggest that, if you don’t get too distracted by such side issues as the fund performance race, a few good mutual funds on their own ought to provide you pretty well with what you’re looking for.

If they don’t, then you aren’t letting the funds do the job they were designed for.