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Someone Will Make Money on Your Funds - Why Not You?
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Someone Will Make Money on Your Funds - Why Not You?

A Better Way to Select Mutual and Exchange-Traded Funds

Gary L. Gastineau
Wiley, 2005
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Editorial Rating

8

Qualities

  • Innovative
  • Applicable

Recommendation

This is one of the better short guides to fund investing. Although the title emphasizes exchange-traded funds (ETFs), in fact the book covers much more. Gary L. Gastineau reviews the basics of mutual-fund investing with a particular emphasis on risks and expenses of which many retail investors are unaware. He is frank about the scarcity of reliable comparative information about funds, but offers some useful pointers for investors aiming to assemble a portfolio. He covers index funds, actively managed mutual funds and exchange-traded funds, pointing out the relative advantages and disadvantages of each. He provides useful insight into the tax and expense advantages of exchange-traded funds, but he never gives the impression of becoming a salesperson or promoter. His style is low key, sometimes to the point of dullness. However, exciting investment writers are usually not the most credible. This author gives an impression of sound good sense and steady balance. getAbstract recommends this book to new investors in particular, but old hands may also encounter a few new ideas.

Summary

The Unknown Unknowns

Mutual funds can be risky and expensive. Top managers reap high fees, but fund expenses are often inversely proportional to performance. In other words, investors don’t always get what they pay for – they often pay far more than they should. Even index funds vary widely in their performance returns, and too many assets go into too few indices.

Investors who do their homework discover that dependable information is not easy to find. Errors in the databases of fund advisers are commonplace; no mutual-fund or service reports flow; and fund salespeople seem to have considerable discretion over which numbers they report to the public.

Of course, people save and invest to meet their future needs. You can’t begin investing too early. When you’re young, you can be aggressive. In middle age, you should focus on financial planning, as your lifelong obligations become clear. Retirement doesn’t mean that you have to change your approach to investing. Change only when your wealth level or risk appetite shifts.

Anyone with a reasonable degree of financial sophistication can develop and execute a financial plan based on these basic principles. However...

About the Author

Gary L. Gastineau has been a senior portfolio manager and product development manager for several companies. His previous books include The Exchange-Traded Funds Manual and The Options Manual.

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