Yesterday we talked about why you should stay away from packaged products. And the reason was you rarely know what’s in them.
To add insult to injury they have a fee that’s “wrapped around” the package in addition to the fees charged on every mutual fund.
They may boast having the lowest fees in the industry and/or they have “no load” funds. But ask yourself a question. Who do you know (especially among Wall Street Bankers) that works for free?
The published historical returns on these packages are skewed based on a complicated formula. It’s not based on one measuring stick but numerous benchmarks.
These benchmarks include the S&P 500, MSCI Global Index, Barclay’ global bond fund, US Treasury index, and many other indexes you’ve probably never heard of.
These packages rarely, if ever, outperform the markets.
Even worse, they lose more when we have down markets. That’s because (even though you’re being charged a fee), they rarely change the portfolio around.
And they rationalize it by saying it’s all part of their conservative strategy.
The only option you have is to switch to another fund. And sometimes there is a penalty involved.
So, what do you do?
You should have a game plan that includes moving your money around when the time is right instead of keeping the “set it and forget it” mindset.
Why put yourself at the mercies of these “packaged funds” that are not only horrible performers, but expensive as well.
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