Best Way to Make Money from Mutual Funds: Manage One

A Bloomberg column confirms something that not enough people heed: The best way to make money from mutual funds is to own one, not to have your money invested in one.

The money-management business makes a great road to riches.

Anyone harboring the slightest doubts about that statement can dispel them with a look at the latest Forbes magazine tally of the 400 wealthiest Americans.

In one quick glance down the list, I picked out 25 people whose fortunes derive from the decades-old boom in investment management. They range from two members of the Johnson family that built Fidelity Investments in Boston, the biggest mutual- fund manager, to Joseph Mansueto, whose Morningstar Inc. in Chicago specializes in research on funds and other investments.

A dozen boast fortunes that Forbes specifically attributes to hedge funds, the partnerships for sophisticated investors that have been among the hottest of all financial products in the early years of the 21st century.

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Comments

  1. I’m thinkig we’ll start having “bio-info-nano” laptops before people start caring about risk adjusted rates of return and alpha’s with respect of their 401(k)s.
    There was a survey done about this yesterday. The last factor people considered when choosing their retirement fund was the fund’s performance. Figures…I guess.

  2. Paul K. says:

    Daniel — Can you source the survey that you mention? That’s a fascinating — if teeth-numbingly depressing — statistic.
    P.

  3. sure…
    It was in a print newspaper I threw away, but I’ll check the online archives for Australian Financial Review and it should be there (keywords: retirement, superannuation, aged 40).
    Paul, I don’t think it’s a mind numbing statistic though. (I think it was only 2% of people who actually cared about the returns of the managed funds they chose for retirement.)
    I am not geek, but this result is typical of what Daniel Kahneman predicted when he won the Nobel Prize for economics in 2002.
    I’ll email you the survey (if I find it) and try to put together a post on behavioural finance.
    - Daniel