Phil Town correctly asserts in his New York Times bestseller Rule #1 that over the course of one's work career, over half of the assets earned in a retirement account that is constituted of mutual funds will have been taken away in the form of fees.
This discouraging but little known fact rings further troublesome when you realize that he's not even including taxes, but strictly referring to the multiple charges that your earnings are subject to for the simple fact that you own shares in the fund.
A 401K (or 403B) with a dollar for dollar employer match does recover what is stripped of you, but anything less than a 75% match will have you out of money that could have and should have been yours.
Some people are lucky enough to have stock options and self-direction of their 401K's, but the majority of employees are given a list of mutual funds to choose from.
Other people voluntarily invest money outside of their retirement accounts in mutual funds.
Often citing a lack of market intelligence, a common explanation is "I let the experts handle it".
But what about when the "experts" are the problem? Remember that  the "experts" lost billions of dollars during the market crash of 2008-09, and 96% of fund managers have not beaten the market over the course of their careers when fees are accounted for.
It would actually serve the unintelligent investor better to get a online brokerage account and simply spread their money over the thirty Dow stocks and earn the historic 8% return without the fees.
So the question is, where does all the money go? What are all these fees? Here is a breakdown of the ten fees you are subject to.
The Securities and Exchange Commission breaks them down into two categories, shareholder fees and annual fund operating expenses.
Not every fund incorporates all ten, but many do and all incorporate the majority of them: Under shareholder fees 1.
sales load: funds that use brokers pay the broker to sell their shares.
This compensation is paid by you under "sales load" 2.
sales charge: the fee you pay your broker to purchase fund shares 3.
deferred sales charge: the fee you pay your broker when you sell your shares 4.
purchase fees: the fees you pay the fund to purchase its shares 5.
redemption fee: the fee you pay the fund when you sell its shares 6.
exchange fees: the fees you pay when you transfer from one fund of a group to another 7.
account fees: the fees you pay for "maintenance" of the your account (whatever that means) Under Annual Fund Operating Expenses 8.
management fees: the fees you pay your fund manager to "actively manage" your account 9.
distribution fees (also called service or 12b-1 fees): the fees that you pay so your fund can advertise and market itself 10.
"other" fees: the fees that you pay not covered in the above nine.
Examples are "legal fees" and "accounting expenses" A note about "no-load" funds A fund can legally label itself no load when it eliminates the sales load.
It can still incorporate the other nine fees, and some funds will make up for the elimination of the no load charge by tacking on to the other owner expenses.
Yes, it is criminal what the SEC allows when it comes to mutual funds.
The real travesty is that people are completely naive as to where their hard earned money goes.
One of the beauties of Phil Town's book is that he brings to light this reality and not only warns people of the pitfalls of mutual fund investing, but arms the reader with a alternative system that shatters both mutual fund and overall market return.